Ontario HST Incentives Drive New Home Sales While Condos Lag
The Harmonized Sales Tax rebate on new homes in Ontario helped spur sales of single-family homes in April, but it did little to help revive the beleaguered condominium market.
There were 901 new single-family home sales in the Toronto region in April, the first month the rebate was in effect, according to Altus Group data.
That was more than triple the volume from the same month last year, when sales reached a record low, and 21 per cent higher than the 10-year average for April.
But the tax break didn’t motivate many buyers to purchase new condos, which have fallen out of favour because they are small and no longer profitable for investors.
Last month, there were 199 condo sales in the Toronto region, including condo townhouses. Overall, condo transactions were 39 per cent higher than the same month last year, but down 88 per cent from the 10-year average for April.
The rebate “is not making that much of a difference,” said Edward Jegg, research manager with Altus, which prepared the report for trade group Building Industry and Land Development Association (BILD).
Ottawa and the Ontario government announced the HST rebate on new homes in March, effective April 1, in a bid to help revive the homebuilding industry and clear out the thousands of newly built condos that are unsold in the Toronto region.
Eighty percent of the condos that were purchased in April were apartment-style condos, which have been shunned by individual investors and by residents or end users who plan to live in their units.
“Part of the problem in the condo market now is that a lot of the product is not matching what buyers are looking for,” Mr. Jegg said.
For end users, the size is often too small. For individual investors, condo apartments are seen as a money-losing proposition. The majority of condo investors who closed over the past few years are burning through cash every month because they can’t get enough rent to cover their monthly mortgage payments and other fees.
Today, new condo prices are still well out of reach for buyers. The average asking price for a new condo apartment in the Toronto region was $1,029,164 in April, according to Altus. That price does not include the HST rebate and is similar to April of last year.
For new single-family homes, the average asking price was $1,421,835 in April, a 7-per-cent decline over the same month last year.
The rebate cuts prices significantly. Buyers are eligible for a tax break of up to $130,000 on new homes priced up to $1.5-million.
However, the federal legislation has not yet been enacted, and the industry does not have details on how to implement the rebate. A big unknown is whether the rebate will be applied at closing or after.
Altus and BILD said the lack of clarity is hindering sales.
“The more modest response in the high-rise sector will be alleviated once implementation details related to the HST rebate are finalized,” Justin Sherwood, BILD’s chief operating officer, said in a news release announcing the results.
Currently there are 19,044 unsold new homes in the Toronto region. That includes 13,331 unsold condo apartments.
The Altus numbers do not include the bulk condo purchase from Montreal-based real estate company Jesta Group, which said it recently bought $30-million worth of condo units in downtown Toronto.
Jesta and taxpayer-backed High Art Capital Inc. are among the large investors buying condos in bulk with the plan to rent the units out for a while and then sell them in about five years, when they believe there will be demand for condos again.
Buyers have until March 31, 2027, to make their purchase to qualify for the rebate.
For end-user buyers, construction has to start prior to Dec. 31, 2028, to qualify for the rebate. For investors who plan to rent the unit, construction had to have started prior to March 31, 2026.
This article was first reported by The Globe and Mail
