On May 27th, 2025, Minister of Finance and National Revenue, François-Philippe Champagne, tabled a proposal to eliminate the Goods and Services Tax (GST) for first-time homebuyers (the “FTHB GST Rebate”) on new homes sold up to $1 million. Additionally, first-time homebuyers on new homes between $1 million and $1.5 million will see a linear reduction in GST. As a result of this rebate, first-time homebuyers will be able to save up to $50,000 on a new home through the elimination of GST. But does this proposal make economic sense in working towards solving the Canadian housing crisis?
The FTHB GST Rebate aims to build on and expand existing legislation for Canadian homebuyers. Currently, everyone, whether you are first-time homebuyer or own seven investment properties, can receive up to a 36% GST rebate on new homes sold up to $450,000. These homes can be anything from condos to fully detached family homes, just as long as they are newly built or they have been substantially renovated. Additionally, buyers will have to show that the property is their primary residence, and that they intend to live there upon purchase.
Building on this policy, the new proposal would completely eliminate the 5% GST for new homes up to $1 million, but only for first-time homebuyers. Additionally, the GST rebate has a linear phase-out for homes over $1 million but up to $1.5 million, meaning that as the price goes up, the amount of your rebate goes down (ex. a $1.125 million home gets a 25% GST rebate, a $1.25 million home gets 50%, a $1.375 million home gets 75%, etc.). Since this policy only applies to first-time homebuyers, if you have previously bought a home (of any kind) and are on the market for a new one, you would not be able to claim the FTHB GST Rebate. However, you would still be eligible for the GST reduction on new homes up to $450,000.
So, now that we have an understanding of the plan, what does this policy hope to accomplish, how might it work, and how much will it impact Pitt Meadows-Maple Ridge?
The government’s intention behind the FTHB GST Rebate is to "fill two needs with one deed"; increase the supply of housing by stimulating development through an increase in demand, and incentivize and support first-time homebuyers looking to get into the housing market.
As we can see in these models, a few things will occur as a result of the FTHB GST Rebate:
However, it is important to again note that this rebate only applies to new homes. So what happens with existing homes?
We can assume that if you are a first-time homebuyer looking to purchase a property, you are faced with the option of either a new home or a resell; in other words, they are substitute goods for each other. The rebate, of course, would likely influence the buyer to look more towards a new development. In turn, this would mean that the demand for existing homes should go down, so the price of existing homes would decrease.
Of course, new homes do not make up the majority of the housing market, so a shift in demand for new homes will not have a devastating impact on the existing homes market. However, because existing homes do make a large portion of the housing market, is it likely that overall prices will decrease in the long-term, even if only slightly when we isolate for this policy.
But it is important to note that this is in the long-term, meaning that it requires time… and possibly a lot of it. Canada is known for having rules and barriers that make building housing difficult. Whether it’s zoning regulations at the municipal level, development hurdles at the provincial level, or a lack of financial support at the federal level, each step in the building process takes time to navigate. So, while the demand for new homes may increase instantly once the rebate is announced, supply could take years to catch up.