Canada’s $50,000 Home Rebate Could Ease New Housing Costs for Buyers
A new federal rebate for first-time home buyers could meaningfully lower the cost of homes, though experts say it is not enough on its own to solve Canada’s housing affordability crisis.
On Tuesday, the Canada Revenue Agency (CRA) opened applications for the rebate, where eligible buyers can recover up to $50,000 on newly constructed homes or substantially renovated homes up to $1 million, by recovering the GST or the federal portion of the HST.
“It’s a very meaningful change,” says John Pasalis, president of Realosophy Realty.
“There’s definitely going to be some cost-savings push to first time buyers.
Pasalis says there haven’t been many rebates like this in the past because house prices were rising, and the government never needed to “stimulate demand” for housing.
“This is happening because home prices have collapsed,” says Pasalis.
“It’s not economical for builders to build right now. So they’re using these tax policies as one way to kind of make it more affordable for people buying new homes.”
The latest numbers by The Canadian Real Estate Association show Canada’s housing market saw a cooling period in February, with transaction volumes falling 8.1 per cent compared to the same time last year.
On a month-over-month basis, CREA data shows a 1.3 per cent decline after seasonal adjustments.
Could help builders and support new construction
The CRA says builders can directly apply the rebate to reduce the final purchase price of a new home at the time of closing, like the existing housing rebate.
While the rebate may not dramatically change buyer behaviour , it could give builders more room to reduce prices on homes that have been difficult to sell, says Pasalis.
“It allows them to lower those prices maybe to a point that they become a little bit more attractive to first-time buyers,” he says.
And because the rebate is limited to new construction, it does not increase the prices of existing homes, says Mike Moffatt, housing policy expert, and founding director of the Missing Middle Initiative.
‘It can actually facilitate new construction, while not using demand for already existing assets,” says Moffatt.
He added that the amount helps “level the playing field” between new and resale homes.
“If you are buying a newly constructed home, there is GST, so it makes new homes more expensive than resale,” he says.
This article was first reported by BNNBloomberg
