The Ontario government expanded the eligibility for a rebate on the 13-per-cent federal-provincial harmonized sales tax to more buyers.Sean Kilpatrick/The Canadian Press
Recent tax changes aimed at bolstering sales of newly built homes in Ontario are getting a mixed reception from buyers in communities such as Cambridge, Orillia and Bracebridge.
In recent years, many downsizers and millennials starting a family have been drawn to smaller Ontario cities far from Toronto’s rich real estate prices and traffic congestion.
But the downturn in Canada’s housing market has stalled many of the projects that were set to rise on farmland beyond the Greenbelt surrounding the Greater Toronto Area, while the resale segment has also been in a slump.
In the market for newly built homes, more Ontario buyers are eligible for a rebate of the harmonized sales tax after new rules came into effect on April 1.
Awaiting details on HST rebate for new housing, Ontario homebuyers proceed without mortgage relief
Faisal Susiwala, broker with Re/Max Twin City Faisal Susiwala Realty, has yet to see a stream of new buyers entering the market in response to the policy change. Instead, some buyers who were looking in the resale market widened their search to include the segment for homes under construction or recently completed.
“It’s the same pool of buyers that are now divided between resale and new build,” says Mr. Susiwala, who concentrates his business in Kitchener-Waterloo and Cambridge and the surrounding areas.
“We will see a price decline in resale homes that are in the same price range as new builds.”
Under the change, the Ontario government expanded the eligibility for a rebate on the 13-per-cent federal-provincial harmonized sales tax to more buyers.
Before the change, only first time buyers who planned to live in the home were eligible for a rebate on properties priced up to $1-million.
The new one-year policy expands eligibility to some repeat buyers who will live in the home and investors who plan to add properties to the rental stock.
Ontario to extend full HST rebate to new homes under $1-million
Bradley Saunders, North America economist for Capital Economics, believes the change could help spur a recovery in demand in Ontario.
In a note to clients, Mr. Saunders cautions that reducing new home purchase costs risks pulling demand away from the resale market. On net, he expects the measures to be positive, although he still expects the Multiple Listing Service house price index to fall further over the remainder of the year.
Mr. Susiwala, who has listings for stacked townhouses under construction in the North Waterloo area, notes that some buyers have expanded their hunt to up-and-coming sub-divisions because the pristine condition of a new property is appealing.
But many don’t realize a new property typically does not include a finished basement, driveway, appliances, air conditioning, deck, fence and window coverings.
Those elements mount up to tens of thousands of dollars in additional costs.
He adds that prospective buyers need to be cautious of the sticker price that builders are printing in bold on the sales brochure or the number highlighted by the HST calculators they provide.
The numbers are often misleading, he says, adding that buyers need to pay attention to the fine print.
In addition, even some accountants are struggling to understand the new rules because details are unclear, he says.
In a rattled real estate market, sellers look optimistically to spring
Mr. Susiwala believes a better strategy than the HST rebate would have been for builders to drop their prices to align with supply and demand in the market.
Instead, buyers who signed a contract to purchase a home before the new policy kicked in are, in effect, seeing their properties sink in value.
“It’s a bail out for builders because they were stuck with inventory,” in Mr. Susiwala’s opinion.
Still, the tax rebate has not been brushed aside by all buyers.
Mr. Susiwala was surprised when he received a call from an investor for the first time in months.
The new policy prompted this client to purchase a home to rent out, so Mr. Susiwala took him to see the unfinished sub-division near Cambridge, Ont., and place a lot on hold on March 28.
The buyer returned with the deposit cheque on April 2 for the house which is slated for completion in February, 2027.
Mr. Susiwala points out that a neighbour who purchased the same model in March is seeing some of the value wiped out.
When that buyer’s home is finished and they seek financing from a lender, the appraised value will be based on those nearby properties eligible for the HST rebate.
Prices are not likely to move up or down significantly in the next 24 months, in his opinion, so it’s up to sellers to decide if they want to sell or wait a few years for a stronger rebound.
Buyers who purchased in preconstruction around the market’s high water mark in 2021 and 2022 are already in a bind, Mr. Susiwala says, because buyers who paid $1.4-million or so now find the developer is selling the same model for $999,000.
“The builder is now the competition,” he points out.
Mr. Susiwala adds that the supply of newly built homes has remained fairly steady compared with this time last year because construction at many projects has stalled while developers wait for signed contracts before they proceed.
“There are no shovels in the ground,” he says.
On the shores of Lake Couchiching, townhomes have been relaunched with reduced prices at the Sunshine Harbour development in Orillia, Ont., notes Alexis Victor, real estate agent with Royal LePage Signature Realty.
A corner unit with an advertised price of $1,269,900 is now $1,139,900, for example.
Builders are trying to sell units preconstruction, but in the popular cottage country town of Bracebridge, only five townhouses have changed hands in the past 180 days, points out Ms. Victor.
Investors who purchased a property in preconstruction are struggling to sell the completed homes, she says, because buyers can purchase directly from builders at lower prices.
Ms. Victor says the investors who purchased units in previous years at projects in the area have already lost a chunk of value. Now they are competing with builders who are selling inventory.
The expanded HST rebate is an added blow, she says.
“Historically, investors have gotten these projects off the ground,” she says of developments in Muskoka, Orillia and areas nearby.
She worries that may investors – who have been on the sidelines for more than two years – will not return.
“They’re going to lose so much money, they’ll never do it again,” she says of the mom and pop investors. “People are out. They don’t want to do it any more. There’s too much risk.”
As for the resale market in the area north-east of Toronto, Ms. Victor says the spring of 2026 is more buoyant than the same period last year.
Buyers in 2025 were rattled by political and economic uncertainty.
“Last year was a train wreck,” she says, adding that deal after deal fell apart.
This year, negotiations remain protracted, but consumers seem more confident.
“I’m seeing a lot more positivity from people in general.”
As for the resale market in the Kitchener-Waterloo area, Mr. Susiwala says sales have improved in April as more listings arrived after the Easter holiday weekend.
Some buyers are also ready to move forward after a long stretch of camping out on the sidelines.
“Activity does breed activity,” he says.
Still, offers often come in well below the asking price.
“Buyers are absolutely lowballing every opportunity they get,” he says.
Mr. Susiwala’s opening line when he meets sellers for the first time is “this is the worst time to sell.” With that out of the way, he moves on to why they want to sell now.
Mr. Susiwala finds his most effective strategy at the moment is “event-based pricing.”
He sets an asking price below his estimate of fair market value in order to draw eyeballs to the listing and spark a bidding contest on the scheduled offer date a week or so later.
Mr. Susiwala says it’s important to use that tactic not only for the attention it draws, but because it illustrates to sellers how much buyers are willing to pay for their property.
If a seller is aiming to sell for $900,000, for example, Mr. Susiwala will set the asking price for $799,000. That eye-catching figure draws a lot of house hunters through the property.
The seller may end up with two or three offers to consider. If the bids are clustered around the $850,000 mark, the seller can see that the target was too high.
“If you want to sell, $850,000 is the only number you’re going to be seeing,” Mr. Susiwala points out.
For the most part, sellers are accepting the maxim of real estate veterans: the market has spoken.