Prime Minister Mark Carney has announced a bold new policy to eliminate the federal government’s Goods and Services Tax (GST) on home sales up to $1 million for first-time homebuyers, aiming to make housing more affordable for younger Canadians.
Eliminating the GST on home sales up to $1 million could make housing more affordable by saving buyers up to $50,000 in federal sales taxes. It may also stimulate the housing market by increasing sales and encouraging new construction, providing a boost to the economy.
“Our government is laser-focused on lowering costs for Canadians and making homeownership a reality. Eliminating the GST will save first-time homebuyers up to $50,000 and spur housing construction across the country,” said Carney in a statement on Thursday.
“We will announce a series of new measures to increase housing supply shortly. It’s time for focused action to solve the housing crisis, and it’s time to build a Canada you can afford.”
This will apply to all new and “substantially renovated” homes.
However, the policy could drive up demand, potentially pushing home prices higher and offsetting the savings. The federal government may also face a significant loss in tax revenue, which could impact public services.
Additionally, in high-cost markets like Metro Vancouver and Greater Toronto, where many homes far exceed $1 million, the policy’s benefits may be more limited.
For example, according to Greater Vancouver Realtors, in February 2025, the benchmark price for a condominium was $691,300 in Vancouver East and $839,600 in Vancouver West. Without the 5 per cent GST, there would be tax savings of about $34,600 and $42,000, respectively.
Townhouse prices in both of these Vancouver areas exceed $1 million, never mind single-family houses.
Currently, the federal government already offers a smaller rebate amount of up to $6,300 or 36 per cent of the GST payment that would be required for a home that costs $350,000 or less. If the home costs more than $350,000, the rebate is gradually reduced, with the rebate reaching zero for a home price of $450,000 and over.
My government is eliminating the GST on all homes up to $1 million for first-time home buyers.
— Mark Carney (@MarkJCarney) March 20, 2025
It should also be noted that Conservative leader Pierre Poilievre also previously announced in October 2024 that his party, if elected in the next federal election, would remove the GST on home sales up to $1 million — but for newly built homes only, not existing/old homes.
At the time, the Conservatives suggested such a tax cut could lead to 30,000 more homes built each year, generating more jobs and $2.1 billion of revenue for governments.
The Prime Minister’s policy shift also comes at a time of deep economic uncertainty, with Canada’s weak economic fundamentals now combined with the forthcoming impacts of the United States’ tariffs on Canadian goods, along with the domestic impact of Canada’s retaliatory tariffs.
According to a bulletin by the Canadian Real Estate Association this week, home sales in the country fell sharply from January 2025 to February 2025, with homebuyers remaining on the sidelines in the first full month of the ongoing trade war.
Home sales activity nationwide dropped 9.8 per cent month-over-month in February 2025, marking the lowest level for home sales since November 2023 and the largest month-over-month decline in activity since May 2022.
“The moment tariffs were first announced on January 20, a gap opened between home sales recorded this year and last. This trend continued to widen throughout February, leading to a significant, but hardly surprising, drop in monthly activity,” said Shaun Cathcart, senior economist of the CREA.
Furthermore, housing starts in the key markets of Metro Vancouver and Greater Toronto saw a steep drop in February 2025.
Carney, the former governor of the Bank of Canada and the Bank of England made his policy announcement today amidst a backdrop of media reports speculating that he will call a snap federal election as early as this weekend, with the election day potentially scheduled for late April 2025.
The GST break for lower-value home sales could potentially be his first major campaign promise.
This also follows the recently ended temporary GST holiday over two months, ending on February 15, 2025, for certain consumer items, including groceries. From the outset, this time-limited GST exemption for certain goods was estimated to provide a $1.6 billion tax relief, and it came as people struggled with unaffordable housing and other growing living costs.
According to a new Leger survey conducted between March 14 and 16, 42 per cent of Canadians would vote for the Liberal Party led by Mark Carney, while 39 per cent would vote for the Conservative Party led by Poilievre.
This is the first time since early 2023 that the Liberals are leading the Conservatives in the polls, with the gap narrowing ever since Prime Minister Justin Trudeau announced his resignation two months ago. Carney was sworn into office last Friday, a week after winning the Liberal Party’s leadership race.
Furthermore, 46 per cent of Canadians hold a favourable view of Carney, 28 per cent have an unfavourable opinion, and 26 per cent are unfamiliar.
The same survey also found that Carney (45 per cent) would be best suited to grow Canada’s economy, as opposed to Poilievre (31 per cent). The survey had a margin of error of +/- 2.47 per cent.
