A new report suggests that the federal government's plan to remove GST for first-time homebuyers could increase prices, a finding not ascertained by the Parliamentary Budget Office.

Desjardins Economics warns that the federal GST reduction, while decreasing initial costs, may drive up demand and prices if housing supply doesn't increase.

Housing starts nationwide need to reach 500,000 yearly in order to build millions of new homes by 2031, reported Blacklock’s. Only 227,697 homes were built last year.

Builders and bureaucrats said prior housing plans were doomed to fail over low investor interest and outrageous immigration targets.

Mark Carney says prefabricated and modular housing is the future and announces a $25 billion plan to "scale the industry up massively." pic.twitter.com/WfIgET2sKX

— Rebel News (@RebelNewsOnline) April 8, 2025

Kari Norman, an economist with Desjardins, stated the rebate program's success could lead to increased demand, stimulating further housing construction to fulfill those needs.

The Budget Office (PBO) predicted starts will peak at fewer than 262,000 in 2030. The one-year record for new construction set in 1976 was 273,200 starts. It did not include possible behavioural responses to the program in its analysis.

Norman noted in her report that it’s also possible increased demand from homebuyers will push up home prices in the near-term.

Desjardins cautioned that increased housing demand from the policy could drive up labor and building supply costs, negating some buyer benefits.

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Should you happen to be in the north Toronto area, check out the housing… pic.twitter.com/10fivaYDlq

— Rebel News (@RebelNewsOnline) May 27, 2025

To address housing supply concerns, Desjardins recommends pairing the GST rebate with measures that boost home construction, such as faster permitting, investing in new building methods, tackling labor shortages, and easing zoning rules.

Ottawa's housing tax cut, according to the Canadian Centre for Economic Analysis, would lower taxes on a new $1 million home by 36%, primarily affecting development charges, property transfer taxes, and sales taxes.

GST relief applies to new homebuyers only, with limited exceptions. 

If passed, this legislation, introduced June 5th, would cut a $1 million mortgage by roughly $240 monthly.

Effective July 1, 2024, GST will be exempt on new homes purchased between May 27, 2024 and 2031, as long as construction begins by 2031 and completes by 2036.

Budget Office housing forecast isn't even close to @GregorRobertson target of 500,000/yr despite feds' repeated promises to "build big." https://t.co/DDR9Idq6MG @HICC_ca @PBO_DPB pic.twitter.com/Hf4iksKaWo

— Blacklock's Reporter (@mindingottawa) June 12, 2025

Desjardins reports 85% of new home purchases qualify for the full GST rebate, with 95% meeting the $1.5 million cap in most major cities. Eligibility slightly decreases to 92% in Toronto and 75% in Vancouver.

The PBO estimates 71,711 new homes will receive tax relief under the program, averaging out to $26,832 in savings.

The new housing rebate offers a maximum of $50,000 for $1 million homes, with proportionate rebates for lower-priced homes. Rebates decrease for homes over $1 million, reaching zero at $1.5 million.

The fiscal watchdog projects the homebuyer program will cost $1.9 billion over six years, whereas the government estimates tax savings for Canadians at $3.9 billion over five years.

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