Low-Rise Homes Win Big in May, but Toronto Condos Miss Out
The HST rebate on new Ontario homes helped trigger sales of single-family houses in the Toronto region for the second straight month in May, but the tax break did not motivate buyers to purchase newly built condos.
The region saw 830 new single-family home sales last month, according to data from Altus Group. It was the second month the rebate has been in effect.
Although the sales volume was 8 per cent lower than in April, May sales were still 26 per cent higher than the 10-year average.
In contrast, there were 193 new condo sales in May, according to Altus. That was similar to April’s numbers and 89 per cent below the 10-year average.
“Condos are still lagging,” said Justin Sherwood, chief operating officer of the Building Industry and Land Development Association, a trade group.
One of the reasons, according to developers, is that the harmonized sales tax rebate legislation has not been enacted – even though it took effect April 1 – and the industry does not know how to implement it.
A pressing issue for buyers is whether they will get the 13-per-cent rebate on closing – meaning they will not have to pay the tax up front – or they must pay the tax on closing and wait to receive the rebate.
(A buyer can get up to a $130,000 rebate on a new home priced at up to $1.5-million.)
“They’re concerned about the timing of when the legislation passes,” said Dominic Tompa, president of Daniels Realty Corp., the in-house brokerage for housing developer Daniels Corp.
Although the lack of legislation may have hampered sales, Daniels and other condo developers have seen a pickup in purchases.
Mr. Tompa said Daniels sold about 20 high-rise condo units in Mississauga in May and 40 high-rise condos in April.
The HST rebate was designed to help developers get rid of unsold inventory and spur the home-building industry.
But new condos are still more expensive than those on the resale market. The average price of a new condo in the Toronto region was $1,029,489 in May, according to Altus data. In comparison, the average price of a resale condo was $639,468 in May, according to the local real estate board.
Although the HST rebate has helped whittle down the unsold inventory, a surplus of newly built condos remains.
Last month, there were 18,763 unsold new homes in the Toronto region, including 13,138 condo apartments, according to Altus.
The glut of inventory has piqued the interest of larger investors who see an opportunity to buy condos in bulk at a discount. Some of the investors plan to turn them into rentals for about five years and then sell the units when there is more demand for condos.
One of the bulk buyers, Montreal-based Jesta Group, plans to spend $500-million on Toronto condos and says it has been inundated with inquiries from developers with units.
“We are drinking from the firehose,” said Anthony O’Brien, Jesta’s senior managing director.
Jesta has already spent $30-million on a portfolio of units in one building in downtown Toronto. Mr. O’Brien said he is looking at 35 different buildings that meet Jesta’s criteria.
“There’s definitely a lot of opportunity,” he said.
Jesta will have to convince developers to slash their prices because it plans to spend $700 to $800 a square foot. That is lower than the average asking price for unsold inventory, which is $1,189 a square foot, according to Urbanation data.
Buyers have until March 31, 2027, to make their purchase to qualify for the HST rebate.
For investors who plan to rent out the units, construction had to have started prior to March 31, 2026, to qualify for the rebate. For buyers who plan to live in the unit, construction has to start prior to Dec. 31, 2028.
This article was first reported by The Globe and Mail
