Tax rebate is steering Toronto buyers toward new construction, broker says
It's no secret that Toronto's condo market is still struggling. But while there's no sign of a big wider bounce-back in activity across the city's overall housing sector, the resale market posted a solid performance last month – and higher sales alongside falling prices are starting to redirect where some buyers are looking to put their money, according to a Toronto-based broker.
Greater Toronto Area (GTA) home sales climbed by 8.4% year over year in June to 6,770, according to the Toronto Regional Real Estate Board (TRREB), and overall activity in the first six months of the year was higher than the same period in 2025.
While the current pace is still well off the red-hot market seen in the city during the COVID-19 pandemic, Micky Khaneka (pictured top) of MKG Mortgages told Canadian Mortgage Professional plenty of buyers are finding deals thanks to recent price depreciation and less competition.
"If sales are higher and the prices are going down, that just shows that there is renewed interest and people are willing to purchase at more attractive offers and prices," he said. "We're maybe at the beginning of that tilt to the upside now."
Why the confidence of some first-time buyers is improving
Against a backdrop that includes the sustained slide in Toronto condo prices and a broader slowdown in new-home construction across the region, Ontario's government in partnership with the federal government removed the 13% harmonized sales tax (HST) for eligible buyers of new homes valued up to $1 million, applying to purchase agreements signed between April 2026 and March 2027.
That maximum rebate of $130,000 is also maintained for new homes with a value of up to $1.5 million, decreasing proportionally after that point.
The Fraser Institute has estimated the broadened eligibility could prove significant given local prices, noting that 34.1% of new homes sold in Toronto last year were priced above $1 million and would not have qualified for the maximum benefit under the previous, first-time-buyer-only rules.
Unlike earlier versions of the relief, the expanded rebate isn't restricted to first-time buyers – and Khaneka credited the adjustment with helping boost homebuyer confidence towards the market.
"The new HST that they removed has sparked some renewed interest in the newer homes, especially new builds," he said. "It's definitely gotten more attention – not just from first-time homebuyers, but even the realtor partners we work with.
"A lot of them have pivoted to new builds because taking on HST on bigger homes is creating the perfect opportunity. Getting into the preconstruction side of things buys people more time to come up with the downpayment and also lets them lock in the prices."
The rebate arrived with the new-home sector mired in a difficult stretch. GTA new-home sales plunged to historic lows earlier in the year – with the Building Industry and Land Development Association (BILD) reporting just 269 new homes sold across the region in January, a 36% year-over-year decline and 80% below the 10-year average for the month.
"The sustained nature of the new home slowdown has been underpinned by the combination of affordability concerns and failing consumer confidence," said Edward Jegg, research manager at Altus Group, BILD's official source for new-home market data.
‘Very, very attractive’ prices give hopeful buyers a boost
First-time buyers faced a tough few years during the pandemic, when eyewatering prices and intense competition in the housing market pushed many to the sidelines.
Rising interest rates in recent years have also presented their fair share of challenges – but Khaneka said he's noted a broader change in first-time buyer sentiment this year.
That's because borrowing costs have improved slightly and resale prices have continued to soften, prompting a fresh wave of interest from buyers who had previously been frozen out.
"These prices are very, very attractive as an entry point," he said of the opportunity now facing new buyers. Prices are lining up in a way they haven't in some time – even if no single factor is enough on its own to call the correction over. "We're seeing an uptick on that side which in itself is then leading to better sales numbers," he said.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
