What to know
- New data shows GTA resale home competition remained weak in May, with 92 per cent of homes selling below asking price and only seven per cent selling above asking.
- An economist says Ontario’s HST rebate on new homes may be encouraging buyers to choose pre-construction properties over resale homes.
- Sales of new single-family homes surged above the 10-year April average following the rebate’s introduction, while the resale market remained softer than usual for spring.
- Buyers considering a new-build home may benefit from acting before the rebate is scheduled to expire on March 31, 2027, though one expert says purchasing decisions should still be based on long-term housing goals.
In the real estate market, the warmer months usually mean hotter business, but this year, buyers seem to still be holding off, with reports signalling a cold spring for resale home sales.
It has now been over two months since Ontario’s Harmonized Sales Tax (HST) rebate on new homes came into effect on April 1. The incentive was announced by Premier Doug Ford in March, offering a full 13 per cent HST rebate for all buyers of new homes up to $1.5 million, totalling up to $130,000.
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While the effects of the new incentive are still unclear, a new report by real-estate website Wahi revealed that bidding competition, especially for resale homes in the Greater Toronto Area (GTA), were still abnormally low in May.
Wahi Economist Ryan McLaughlin tells Now Toronto the new report shows various pieces of evidence that the market is remaining soft for this time of year, which could be a result of the HST discounts.
HST rebates leading market into another direction
Out of the 303 GTA neighbourhoods with at least five sales in May recorded only seven per cent of overbidding from the original price, which is 13 per cent down from the previous month. Meanwhile 92 per cent of the resale homes were in underbidding territory, and only one per cent sold at asking price.
At the same time, a report from the Building Industry and Land Development Association (BILD) reveals that there appears to have been a hike in sales of pre-construction homes in the region. According to this report, new single-family home sales outpaced a 10-year average for April by 22 per cent, while new condo sales remained 88 per cent under the month’s norm.
According to McLaughlin, this could be a sign that more buyers are taking advantage of the HST rebates and choosing to purchase new homes instead of resale ones.
“It could be that some of the buyers that would have been in the resale market instead switched into buying new construction homes, and that’s caused a little bit of a softening in the resale market,” he said.
“That HST rebate is pretty substantial…We’re talking about a discount of [up to] $130,000.”
This could also be an explanation for why the market has remained soft this spring, given that the warmer months typically come with a tighter market, with more listings and more competition, which is the opposite of what was seen in May.
What does that mean for buyers?
For buyers, McLaughlin emphasizes that the HST has been the biggest change in the market this spring. The expert says there’s now an abundance of pre-construction and new properties in the market available.
However, these options are time-constrained for those looking to take advantage of the benefit, as the HST rebates are originally planned to end on Mar. 31, 2027.
“That also encourages people to move a little bit more quickly,” he said.
Although the incentive only applies to new homes, McLaughlin says the market suggests the rebates have also led to more affordable opportunities for other properties.
With more buyers now moving into the pre-construction market, the expert says there is less pressure in the resale market than originally expected for this time of year, which could also mean cheaper prices and for resale homes.
“In effect, the government is cutting taxes, and that tax cut is, in a way, passing through directly into affordability for buyers,” he added.
Is now a good time to jump in?
Whether this is a good time to buy or not depends on buyers’ own home ownership goals, as pointed out by McLaughlin.
If buyers are already considering buying a home and would consider a new build, the expert said it could make sense to buy right now, given the HST rebates. According to McLaughlin, although there’s a chance the rebate might be extended after the initial planned end next March, that is still not guaranteed. In this case, taking timely action is important to ensure they take advantage of it.
However, he says buyers should keep in mind that buying a home is a complex decision that includes considerations of their current and near-future lifestyle.
“Whether or not prices are going to go up or down a little bit over the next year, two, [or] three, ultimately, that, in some sense, shouldn’t matter for the homebuyer, since you should only really be making that transaction if you’re ready to be in the home for quite some time and ready to ride out those short-term fluctuations.”
