A new incentive, allowing home buyers to recover taxes paid on a newly built home, has been introduced, giving builders more reason than ever to build new homes. The rebate was designed to encourage more builds, since not enough homes are being built across Canada to meet demand and restore affordability in the housing sector.
The builders have full control over whether the rebate is applied, as they are the ones who apply for it to reduce the purchase price.
While not all builders do this, many who do make buying a new build much more accessible for Canadians.
Provincial versus Federal
There is currently a federal new housing rebate that applies a 36% rebate of the 5% tax on new homes, so long as they are used as primary residences. That said, it applies only to select new builds—homes valued at $450,000 or more do not qualify.
The types of homes that can qualify include detached and semi-detached houses, townhouses, condo units, duplexes, and mobile or floating homes. Units in cooperative housing corporations can also apply.
The Ontario New Housing Rebate, which was recently expanded, removes all HST (13%) that would otherwise apply to newly built homes, providing savings of up to $130,000.
The full rebate will cover homes up to $1 million, but homes priced as high as $1.8 million can still qualify for a partial rebate, giving even pricier home builds the chance to pass savings on to the buyer.
What makes you eligible
First-time home buyers benefit from these rebates, so long as their purchase agreement was signed between March 20, 2025 and before 2031. The home must also serve as the primary residence.
There is a separate new residential rental property rebate for developers and builders, but it does not fall into the same category as the HST rebate, so the two are not one and the same, and the amount of savings in a rental property situation is most felt by the builders themselves as opposed to those who will be living on the property.
While the HST rebate is largely reserved for new builds, older homes that have been substantially renovated may also qualify if they meet a certain threshold.
While builders apply, those who purchase the home benefit the most, which can lead to lower home prices for new builds. Owners who are building their own home on their land also qualify for the rebate, but they must apply for it themselves.
What this means for buyers
Home buyers will likely see lower home prices for builders that utilize the rebate, allowing those who had been priced out of the market a chance to get back in. However, lower prices may not last long, so it’s important to understand everything the rebate means and how you can take advantage of it sooner rather than later.
We highly recommend that the new home agreement and clauses related to the rebates be reviewed by an experienced real estate lawyer. The rebates are very confusing, and you, the buyer, want to ensure you are actually getting the rebate!
Remember, the rebates are meant to encourage builders; the consumer is the afterthought here. I saw a recent article stating 74% of new homes have gotten more expensive since the introduction of the rebate. So let’s tread into this with some caution - and together!
If you’re in the market for a new home and aren’t sure if a new build is the right choice, give us a call. We can help you find builders who have applied for a rebate to bring down prices and help more people find the home of their dreams.