Last week, Prime Minister Mark Carney proposed waiving the GST on new homes up to $1 million—but only for first-time buyers. Conservative leader Pierre Poilievre had originally planned to eliminate the GST on all new homes up to $1 million, regardless of who’s buying—but quickly upped the limit to $1.3 million in a bid to one-up Carney.
On the surface, both plans are meant to help stimulate the housing market. But let’s not lose sight of what’s actually going on here - and who these tax breaks really benefit. If we’re being honest, these proposals aren’t about helping families afford homes. They’re about bailing out a new housing market that was inflated by speculative investors and is now struggling to stay afloat.
Let’s take a step back. The new housing market isn’t frozen because of taxes. The GST and development charges have been around for years—even when the condo market was booming. What’s changed isn’t the GST tax rate but the irrational prices that investors were willing to pay during the speculative frenzy. They were handing over $1,800 a square foot for pre-construction units that were worth $1,200 on the resale market. That was never sustainable.
Now that the bubble’s burst, builders can’t sell units at those inflated prices, and buyers aren’t biting. There’s a massive disconnect between what builders need to charge to make their projects viable and what end-users are willing to pay. Instead of letting the market correct itself, we’re now talking about using tax dollars to subsidize the very investors who helped drive up prices in the first place.
This is a pattern I’ve seen repeatedly: the same housing economists and pundits who advocated for an investor-driven free market during the boom are suddenly calling for government intervention when the market crashes. Apparently, when things go bad for investors, the “free market” needs help from taxpayers.
This investor-driven housing model is a big part of the problem. We’ve allowed a system to flourish where first-time buyers compete against older, wealthier investors - many of whom already own multiple properties. When you prioritize investors, you shut out the next generation from homeownership.
Even worse, this model harms our long-term economic productivity. When governments and banks funnel capital into housing speculation instead of business investment, we’re left with an economy that extracts value instead of creating it. That’s part of why Canada’s per capita GDP growth is among the worst in the OECD.
So if you ask me which plan is better - Carney’s or Poilievre’s - I lean toward Carney’s. At least it prioritizes first-time buyers. It’s not perfect, and frankly, I’d rather see the GST exemption apply to the first $1 million of any home purchase (not just homes under $1 million), but it’s a better approach than giving blanket subsidies to speculators.
We need policies that put families ahead of investors. That’s the only way we start to fix this broken housing system.
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
Have questions about your own moves in the Toronto area as a buyer, seller, investor or renter? Book a no-obligation consult with John and his team at a Realosophy here: https://www.movesmartly.com/meetjohn
March 25, 2025
Market |