Garry Marr examines why selling a 'used' home has become increasingly challenging in Canada's current real estate landscape. The tax break on new homes has dramatically narrowed the price gap between buying new and buying resale, leaving sellers of existing properties at a disadvantage.
A friend with a preference for new properties refers to the author's approximately 40-year-old home as a 'used' house. While this phrasing may seem odd in a country where roughly 500,000 resale homes change hands annually—compared to fewer than half as many new homes built—the appeal of owning something brand new remains strong.
Ottawa and Ontario have tilted the scales toward new housing by eliminating the harmonized sales tax on homes worth up to $1 million. This move, worth as much as $130,000 in Ontario, is clearly aimed at reviving Toronto's struggling condo construction market. Condo research firm Urbanation recently reported that only 246 new condominium units sold in the Greater Toronto and Hamilton Area in the first quarter, down 52% year over year and 94% below the 10-year first-quarter average of 4,046 sales. A glut of unsold condos has emerged, and prices were already falling before the tax break further narrowed the gap between new and resale.
Ben Myers, president of Bullpen Consulting, urges developers to adjust quickly to the new price reality. He calls the market peak of 2021 a 'mirage' that is no longer relevant. 'They need to mark down prices to at or only slightly above the resale market,' Myers said. 'Now is the time to do it, if you really want to move those units with the HST holiday.' The tax holiday applies to purchases made between April 2026 and March 31, 2027, dates that have already frustrated buyers who signed deals before the rebate was announced.
The tax break also raises a difficult question for those who bought into the condo market over the past decade but are considering selling: How can you compete with a brand-new unit selling for almost the same price? 'The value isn't much different,' Myers said. 'You probably have additional smart features and some amenities that were not offered five years ago.' New homes also come with warranties, though buyers may hesitate if construction on the building is still ongoing.
Today's condo projects are much larger than they were a decade ago. Older buildings with fewer units can still appeal to buyers seeking a less crowded living environment. Robert Hogue, assistant chief economist at Royal Bank of Canada, said he has heard stories of tension within condo developments where owners who bought earlier are upset to see newer purchasers paying less after tax. 'There are some frustrated buyers who paid their deposits,' Hogue said. Developers with signed contracts are largely forced to tell those buyers that the timing is unfortunate.
