The federal government has introduced proposed legislation to eliminate the 5% goods and services tax (G.S.T.) on select newly built homes for eligible first-time homebuyers.

The planned rebate has widespread implications for Canada’s condominium market. Many first-time homebuyers purchase condos after shifting from rentals.

If passed, the measure would provide substantial tax relief aimed at improving affordability and stimulating sales in the new-home market.

The exemption could indirectly benefit investors and developers, particularly those in the Greater Toronto Area, who are grappling with slower sales amid a surplus of new supply. Many prospective purchases across Canada have forfeited their deposits on presales to relieve financial pressures.

The full G.S.T. rebate would apply to new homes valued at up to $1 million, resulting in savings of up to $50,000 for first-time buyers. For homes priced between $1 million and $1.5 million, the rebate would be phased out on a sliding scale. For example, a $1.25-million home would qualify for a 50% rebate, offering up to $25,000 in tax savings.

To qualify, buyers must be Canadian citizens or permanent residents, at least 18 years old, and must not have owned or lived in a home that they or their spouse or common-law partner owned in the current or past four calendar years. The exemption applies to newly built homes purchased from a builder, homes built by or for the purchaser on owned or leased land, or purchases of shares in a co-operative housing corporation. The home must also be intended as a primary residence.

“It’s targeting a small group of people, but it’s helping those who need it the most,” said Ian Calvert, vice-president and principal at Toronto-based Highview Financial Group. 

While the rebate is not expected to lower home prices directly, it could offer meaningful financial support to prospective first-time buyers, especially those in higher-priced markets like the GTA and Vancouver region.

The proposed legislation must pass in the House of Commons and Senate before the exemption can take effect.