GST relief for first-time home buyers on new homes valued up to $1.5 million

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June 27, 2025

Owning a home is a dream for many Canadians, but rising costs have made it increasingly challenging, especially for first-time home buyers. On May 27, 2025, the Canadian government introduced a game-changing policy to ease this burden: a GST exemption for first-time home buyers on new homes valued up to $1.5 million. This initiative, announced by Prime Minister Mark Carney, aims to make homeownership more attainable and stimulate new housing construction. This rebate, combined with the existing GST/HST New Housing Rebate, is projected to deliver $3.9 billion in tax savings over five years, starting in 2025-26, making it one of the most significant housing affordability measures in recent years.

The rebate is set to kick in on July 1, 2025, Canada Day. Here’s everything you need to know about this exciting opportunity and how it could help you step onto the property ladder.

What Is the First-Time Home Buyers’ GST Rebate?

The First-Time Home Buyers’ GST Rebate eliminates the 5% Goods and Services Tax (GST) on new or substantially renovated homes purchased by qualifying first-time buyers. Effective May 27, 2025, this policy offers:
• Full GST Exemption: For new homes valued up to $1 million, first-time buyers pay no GST, saving up to $50,000.
• Partial Rebate: For homes priced between $1 million and $1.5 million, a phased rebate applies, with savings decreasing linearly.

For example:
• A $1.1 million home qualifies for a $40,000 rebate.
• A $1.25 million home qualifies for a $25,000 rebate.
• A $1.4 million home qualifies for a $10,000 rebate.
• No Rebate for High-Value Homes: Homes valued at or above $1.5 million are not eligible.

Who Qualifies for the GST Exemption?

To take advantage of this rebate, you must meet specific eligibility criteria:
• First-Time Buyer Status: You (and your spouse or common-law partner) must not have owned and lived in a home in the current year or the previous four calendar years. If one partner qualifies as a first-time buyer, the couple may still be eligible.
• Primary Residence: The home must be intended as your primary residence.
• Purchase Timeline: The Agreement of Purchase and Sale must be signed between May 27, 2025, and December 31, 2030, with construction starting before 2031 and substantially completed by 2036.
• One-Time Benefit: The rebate can only be claimed once per individual and is not available if your spouse or common-law partner has previously claimed it.
• Canadian Citizenship or Permanent Residency: You must be a Canadian citizen or permanent resident. Notably, there are no income restrictions, meaning the rebate is based solely on buyer status and home price.

Key Benefits:

• Significant Savings: The new GST rebate gives first-time homebuyers a powerful financial edge. By eliminating the 5% GST on newly built homes (up to a certain threshold), first-time buyers effectively purchase their property at a lower net cost than non-first-time buyers. This savings isn’t just immediate—it creates a lasting resale advantage.From the moment they take possession, the first-time buyer is already ahead of the market, having secured their property at a discount that others cannot access. When it comes time to sell, they’ll be in a stronger equity position and can price more competitively compared to those who purchased without the rebate. This is huge.
• Another benefit is more of a result of an unintended consequence: Accelerated mortgage pay-down. As this is a rebate, it means that your GST will initially be calculated and factored into the gross mortgage amount (up front). Then, you will have to apply for the rebate after your closing. So, assuming you lump-sum your rebate back against the mortgage principal, you will then be accelerating your principal paydown because your initial amortization schedule (and mortgage payment) accounted for the GST already. It’s one of those scenarios where the default works in your best interest. Not only will you be reducing your mortgage amount when you deposit that rebate back into your mortgage, but you will also continue making larger payments towards your principal because the initial payments were calculated as though there was no rebate. But of course, this could all be a moot point if you decide to take that rebate money and spend it elsewhere, which, of course, is your choice. You can do whatever you desire with the rebate proceeds; it doesn’t have to be reallocated back against your mortgage.
• Increased Housing Options: The tax savings could allow buyers to consider higher-quality homes or better locations within their budget.
• Boost to New Construction: By incentivizing purchases of new builds, the policy should encourage developers to create more housing, addressing supply shortages in high-demand areas like the Fraser Valley and Metro Vancouver. However, buyers in major cities like Vancouver and Toronto, where average home prices often exceed $1 million, may find only limited options for new builds under the $1 million threshold, particularly for townhomes or detached homes. We’ll simply have to see how this evolves, I think the boost effect will be scaled depending on which region you are considering. For example, Calgary and Edmonton are already building up a storm and seem to have unlimited developable land into the future, whereas Vancouver will always experience scarcity when it comes to residential-grade land…Vancouver supply is so unique in that it has 4 rigid boundary barriers that severely restrict expansion; you have the coast to the west, the mountains to the north, the US border to the south, and everything else is either agricultural reserve or flood plain. It just is what it is, it’s actually unbelievable. I don’t see this policy being hugely impactful in Vancouver with single family dwellings, but for condos and townhomes (particularly in the Fraser Valley), it will certainly be advantageous.

Potential Impacts on the Housing Market

• Increased Demand: The policy could drive demand for new homes, especially in more affordable regions like Abbotsford, Chilliwack, and Kamloops, where homes under $1 million are more attainable.
• Construction Boom: Developers may shift focus to projects priced at first-time buyer-friendly levels, increasing housing supply.
• Price Pressure: Some analysts suggest that increased purchasing power could put upward pressure on home prices in the short term, particularly in competitive markets.
• Limited Impact in High-Cost Cities: In markets like Vancouver, where new condos may fall under $1 million but townhomes and detached homes often exceed this, the policy’s impact may be limited. Critics argue that a 5% discount may not be enough to make homeownership affordable for households with average incomes in high-cost cities, where additional measures are needed.

Tips to Maximize the GST Exemption

1. Shop Within the Price Range: Target homes priced at $1 million or less to secure the full exemption. Even a slight price reduction could bring a property into the full-exemption range.
2. Plan Your Timeline: Ensure your purchase agreement is signed on or after May 27, 2025, to qualify. If you’ve already signed a pre-sale contract before this date, you won’t be eligible, so plan strategically.
3. Work with Experts: Partner with a real estate agent and mortgage broker familiar with the rebate program to identify qualifying properties and navigate the application process.
4. Keep Detailed Records: Maintain all receipts, contracts, and documentation to support your rebate application.
6. Consult Professionals: A real estate lawyer or accountant can ensure you meet eligibility requirements and avoid costly mistakes.

Final Thoughts

The First-Time Home Buyers’ GST Rebate is a promising step toward making homeownership more accessible, but it’s not a one-size-fits-all solution. In high-cost markets like Vancouver and Toronto, buyers may need to combine this rebate with other strategies, such as longer mortgage amortizations (recently extended to 30 years for first-time buyers) or exploring more affordable regions. As the policy rolls out, stay informed about any updates or additional affordability programs. Some experts suggest that future policies might include income-based criteria or expanded thresholds, as proposed by former Liberal leadership candidate Chrystia Freeland, who advocated for a $1.5 million cap for full exemptions.

The GST exemption for first-time home buyers is a significant win for young Canadians dreaming of homeownership. By saving up to $50,000 on new homes, this policy reduces financial barriers and supports the construction of much-needed housing. Whether you’re eyeing a condo in Metro Vancouver or a townhome in the Fraser Valley, now is the time to start planning.

Have questions about the GST rebate or ready to start your home-buying journey? Link up directly with Marko for more information (see below, “Connect With Marko”).