Dear David,

We’ve just heard the news that the provincial and federal governments will be removing HST on new homes for the next year. As hopeful buyers who’ve been sitting on the sidelines for the past 12 months waiting to see how the market unfolds, we’re wondering  how this will impact the housing market? – UNSURE

DEAR UNSURE: This is a meaningful and impactful policy shift, but it probably won’t be felt in the way many people expect, at least not out of the gate. The real estate market is like a steam locomotive, in that it doesn’t spring into motion instantly. The wheels start turning a little at a time, slowly chugging forward as it builds momentum. 

In the short term, removing the HST on new homes will effectively lower the cost of buying new construction. This will likely increase demand, particularly from buyers who were already close to making a move but needed a financial nudge. Builders may also see renewed activity after a slower period, with pre-construction sales starting to move again.

But increased demand almost always brings a secondary effect, which is upward pressure on pricing. If a large number of buyers enter the market at the same time, builders won’t necessarily leave all of the savings on the table. Some may be absorbed into higher base prices, reduced buyer incentives, or firmer negotiating positions.

It’s important to recognize that the new government incentive applies to new homes only, and may well create a temporary imbalance between the resale and new construction markets. Some buyers who would have considered resale may shift toward new builds, which could soften the short term demand for resale homes slightly, but not dramatically. In terms of overall market direction, resale inventory, interest rates, and broader economic confidence will play a much larger role.

From a timing perspective, these types of policies tend to “pull demand forward.” In other words, buyers who were planning to purchase down the road may instead buy now to take advantage of the tax savings. The result may be a busier-than-normal market in the short term, followed by a potential slowdown once the incentive expires.

For someone in your position, current conditions may be less about trying to time the market, and more about recognizing that a window of opportunity has opened. If a new-build home aligns with your plans and needs, there is real value in taking advantage of the incentive if the location, builder reputation and price relative to comparable sales aligns with your financial situation.

The key takeaway is this: the new policy will likely stimulate real estate activity and start the locomotive wheels turning, but it won’t change the fundamental or long-term trajectory of the market. This is a short-term catalyst, not a permanent shift. So rather than asking, “What will the market do?” a better question might be, “Does this opportunity align with what we already had in mind?”

PRO TIP: Don’t assume the HST savings is automatically a great deal. Compare final all-in pricing (including builder adjustments, incentives, and upgrades) against resale options and recent comparable sales. Buying the right property at the right value for your long-term plan is more important than just the tax break. #Advice #AskDavid #TheNegotiator 

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Moving? Get it right. Ask David today! Call or text 519-577-1212.