GST relief could save 1st-time home buyers $240 on mortgages: report

The Liberal government introduced legislation on June 5 to eliminate the GST portion from new home sales of up to $1 million for first-time buyers.

The Liberal plan to give first-time homebuyers a tax break on a newly built home could have substantial impacts on housing affordability — with a few caveats — a new analysis finds.

The Liberal government introduced legislation on June 5 to eliminate the GST portion from new home sales of up to $1 million for first-time buyers, which works out to as much as $50,000 off the cost of a new build or a substantially renovated unit.

For homes sold above $1 million, the GST relief is phased out as the price tag nears $1.5 million.

Desjardins Economics said in a report released Monday that first-time Canadian homebuyers could save up to $240 on their monthly mortgage payments if they were to buy a new home with an all-in, tax-included price of $1 million. The required down payment would also be somewhat smaller.

Some developers charge the sales tax upfront, so it’s not rolled into the mortgage principal at the time of purchase.

“For these homes, eliminating the GST will help prospective buyers reduce upfront closing costs, helping them get their foot in the door sooner,” said the report, authored by Desjardins economist Kari Norman.

She argued the impact on housing affordability will be “particularly strong” for buyers in Canada’s more expensive markets, like Toronto and Vancouver, where homes are routinely priced above the $1-million mark.

The new policy takes a big step beyond the existing New Housing Rebate, which is open to more than just first-time buyers but has long been capped at homes priced up to $450,000.