(Ottawa) — The Parliamentary Budget Officer (PBO) says that an eligible first-time homebuyer would save an average of $26,832 in sales tax on the purchase of a new home under the latest housing proposal from Ottawa.
In a new analysis released Wednesday, the federal government’s fiscal watchdog estimates that 71,711 new constructions would qualify for a Goods and Services Tax (GST) rebate over the duration of the program.
The proposal eliminates the federal portion of the sales tax on new homes valued up to $1 million, if purchased by an eligible first-time homebuyer.
The GST rebate would be gradually reduced as the home's price approaches $1.5 million.
The PBO estimates that the program would cost $1.9 billion over six years, while the federal government has projected its cost at about $3.9 billion.
Homes purchased between May 27, 2025, and the year 2031 would be eligible for the rebate, provided construction begins before 2031 and is completed by 2036.
Canadians who already own a home are not eligible, with few exceptions. Investors are also excluded.
The PBO’s latest cost estimate is about $100 million lower than its figure during the federal election campaign when the GST rebate was first proposed. The discrepancy is attributed to a later implementation date and a different definition of first-time buyer.
An analysis published Monday by Desjardins suggested the government believes its program will be more popular than the PBO expects — in other words, more first-time buyers will purchase eligible new homes.
The GST rebate, which is not yet in effect, was part of the Liberal Party's election platform to help Canadians enter the housing market.
A $1 million home would be eligible for the full rebate of $50,000. Homes priced below that would still qualify for the full rebate, although the actual dollar amount saved would be smaller due to the lower tax portion.
Homes priced over $1 million would receive a reduced rebate, phasing out entirely by $1.5 million.
The Desjardins report, authored by economist Kari Norman, says that if the program is successful with first-time buyers, it could spur more housing construction to meet increased demand.
The PBO noted that it did not account for behavioral changes the program might induce.
Norman also pointed out that increased demand could lead to short-term price increases.
“As with any policy that stimulates demand, this measure risks driving up prices if supply can’t keep up,” she warned in her report.
She estimates that 85% of new homes built in Canada during the program's timeline would be eligible for the full GST exemption — up to $50,000.
For homes where the GST is rolled into the mortgage, the average buyer could save around $240 per month on mortgage payments. Savings would be more immediate if the developer charges GST upfront.
Source: La Presse
