In an effort to make housing more affordable for first-time homebuyers, the Government of Canada has announced that it is eliminating the Goods and Services Tax (GST) on new-build homes. According to the Government of Canada, this rebate will “lower the upfront cost of buying a new home for young Canadians and spur the construction of new homes across the country”.
Who is Eligible for the GST Rebate?
First-time home buyers purchasing a new construction home priced up to $1 million are eligible for a GST rebate covering 100% of the GST. In comparison, first-time home buyers purchasing a new construction home priced between $1 million and $1.5 million are eligible for a reduction in GST. This rebate will result in savings of up to $50,000 on a new home and $3.9 billion in tax savings for Canadians over the next five years.
To qualify for the first-time home buyer GST rebate, you must buy a new construction home from a builder; build, or hire someone else to build, a home on land you own or lease; or buy shares of a co-operative housing corporation. Additional eligibility requirements can be found on the Government of Canada’s website.
How Much Will Home Buyers Save?
Those eligible for the new home GST rebate will receive a rebate of 100% of the GST on homes valued up to $1,000,000. This translates to up to $50,000 in savings. Meanwhile, those purchasing a home valued between $1,000,000 and $1,500,000 will receive a GST rebate that is phased out linearly depending on the purchase price.
What This Means for the Canadian Real Estate Market
This rebate is designed to make new homes more affordable for first-time homebuyers and ultimately make homeownership more attainable, which has been a concern for Canadians of all income levels.
A recent Zoocasa survey found that 29.9% of Canadians earning under $100,000 spend over 30% of their income on housing, compared to just 22% of those earning above that amount. When asked what would most boost their confidence in buying a home, both higher- and lower-income respondents pointed to cheaper housing options as the top factor. The rebate directly tackles this concern by reducing upfront costs and improving affordability for new builds.
This new GST rebate comes on the heels of the mortgage reforms introduced in December 2024, which increased the insured mortgage cap from $1 million to $1.5 million. This allows qualified buyers to make smaller down payments: 5% on the first $500,000 and 10% on the portion up to $1.5 million. Previously, homes priced over $1 million required a 20% down payment, making many properties unaffordable for buyers in higher-priced markets. The updates also extend the maximum amortization period to 30 years for first-time buyers and purchasers of newly built homes, helping to lower monthly mortgage payments and improve mortgage qualification.
Altogether, these initiatives aim to lower the barriers to entry for homebuyers, stimulate demand for new housing, and offer meaningful support during a time when many people are struggling with the rising cost of living. While they may also drive increased competition (particularly in high-demand areas), they provide a more straightforward path to ownership for Canadians who have long been priced out of the market.
A Stronger Starting Point for First-Time Buyers
In a market where affordability remains a top concern, even small savings can make a real difference. Shaving thousands off the upfront cost of a home, thanks to the GST rebate and recent mortgage changes, gives first-time buyers a little more room to breathe, budget, and plan.
By lowering upfront costs and extending repayment timelines, first-time buyers can take that next step with a little more confidence. Because when you’re trying to save for your first home in 2025, every dollar does count.
Thinking about buying your first home? A local Zoocasa agent can guide you through every step of the process and help you make a confident, informed decision.
