Will Ontario’s HST cut actually revive the housing market? Expert weighs in

The Ontario government is taking steps to offer a full Harmonized Sales Tax (HST) relief for new homes, but one expert says the incentive might not be enough to push buyers back into the market, leaving sellers a tough choice: bringing prices down or not selling at all. 

Premier Doug Ford’s government recently unveiled plans to eliminate the full HST on new homes valued up to $1 million, providing up to $130,000 of relief to eligible buyers who purchase a property by next March. 

The rebate comes as the government aims to encourage buyers to jump into the market, which has considerably slowed down in the last year. 

Although the new incentive could provide one more reason for those who are already looking to buy to get their foot in the door, many buyers are still stepping back from purchasing, and others are being able to negotiate prices below the asking value. 

Now Toronto spoke with Victor Tran, Rates.ca mortgage and real-estate expert, to understand what this means for sellers in the market. 

Why are buyers not jumping in? 

Prices are down, there are opportunities for negotiation, and now even incentives for buying, but what’s keeping people away? 

Tran points out that affordability continues to be top-of-mind for many Canadians. Especially as U.S. President Donald Trump’s tariffs and now conflicts in the Middle East drive everyday expenses up, many people are just trying to get by, and are not ready to commit to a purchase as large as a home. 

In addition, tariffs and global conflicts are leading to economic uncertainty not only in Canada but worldwide. Without knowing for certain how the situation will be moving forward, many are also holding back. 

“Mortgage rates have also moved up quite a bit, and the recent weeks because of the conflict in Iran has a bigger impact on monthly affordability. So, when you factor in those costs, like mortgage carrying costs, plus all the other fixed expenses tied to housing, like home insurance and property taxes and maintenance, all of that adds a lot of pressure,” Tran explained. 

In addition, the HST rebates launched by the province tackle new builds. Since some of these homes are still going to be completed in the coming years, seeking mortgage qualification now might also raise uncertainty, as financial circumstances might change by the time the home is ready to move in. 

“It’s not common for people to secure an approval now, when the project is going to be complete, like a year from now, or even a few years, if it’s a newly built condo, right? If there’s a job loss, for example, then that’s a huge problem for that purchaser, because they may not be able to get a mortgage at all. So, there’s definitely a lot of risk elements [involved in] buying a new construction,” Tran said.

What does this mean for sellers? 

The fact that buyers are currently having more opportunities to negotiate prices and terms means that sellers now have to adapt to a market that is no longer favourable to them. This might include having to bring their prices down to make their property more attractive to buyers. 

According to Tran, for sellers that first purchased their properties back in 2021 or 2022 when the market was hot and prices were skyrocketing, this might even mean selling for less than what they bought.  

“I feel like a lot of sellers are stubborn, and they’re just not willing to accept the new market conditions based on lower value…and just expecting prices from the pandemic with their all-time highs. But, every year since 2022 when the market peaked, the prices have been declining. And I feel like a lot of sellers have just not adjusted to reality yet,” he said. 

Tran says a lot of sellers who are not in urgent need of selling, might be choosing to keep their prices up while waiting for conditions to turn up their way again. Meanwhile, those who are in urgent need of selling will need to choose between selling for less or holding onto it for longer. 

“They will remain motivated, and they will adapt to the market expectations. It depends on the market segment as well, whether it’s a freehold or condo, but they’re all a little bit different,” he added. 

In addition, considering that the HST incentives are focused on new builds, those who are looking to sell older buildings might be facing a new challenge. 

As explained by Tran, in certain municipalities, prices are usually pretty similar for newly-built freehold properties and older homes. In this case, with the HST rebates coming in, many buyers might now find it more advantageous to buy a new home over one that’s been lived in. 

“Put yourselves in the shoes of a home purchaser, and you’re looking to save money and look at a property that’s in great condition, you’ll likely lean towards a new build because the pricing is pretty similar, and of course, you’re going to get a decent tax rebate as well, instead of purchasing that resale home that’s maybe a little bit older or needs renovations,” he said. 

This doesn’t necessarily mean that the resale market is going to do poorly, according to Tran. Many people might still prefer to purchase a property that has been lived in over one that’s just good on paper. 

However, some buyers might have to drop their prices further to make their properties more attractive. 

Will the HST rebate bring buyers into the market?

While the rebate might offer a push for those who are already looking to buy and have qualified for a mortgage, Tran says it might not be enough to attract those who are still uncertain or who have affordability concerns. 

“I feel like the government, both federal and provincial, tried many different things in the past to spur housing demand, and while it does increase some sales, it’s not as significant as they hoped,” he said. 

Especially considering the ongoing conflict in the Middle East, Tran says he doesn’t believe the market will turn up anytime soon. 

“Again, it’s because of affordability and inflation is always a concern. So, I don’t think it’s going to improve anytime soon. I think it can still take a few more years,” he added.