Ottawa’s recent announcement to introduce a GST rebate for first-time homebuyers has sparked a lot of conversation, and for good reason. The federal government’s new proposal aims to make homeownership more attainable for Canadians, especially those looking to buy a newly built home. For first-time buyers in Alberta, this could mean significant savings and an opportunity to ease into the housing market.

What is the GST Rebate?

Under the new program, first-time homebuyers can expect an average savings of $26,832 on the Goods and Services Tax (GST) when purchasing a newly built home. The federal rebate would apply to homes priced up to $1 million, with the rebate phasing out as the price approaches $1.5 million. For homes at or below the $1 million threshold, the full GST rebate of up to $50,000 would be available.

This initiative, which runs from May 27 through to 2031, is part of the federal government’s broader effort to address the ongoing housing affordability crisis in Canada. By eliminating the federal portion of the sales tax, the rebate is designed to ease the financial burden on homebuyers, enabling more Canadians to enter the housing market.

Impact First-Time Buyers in Alberta

Alberta’s real estate market has been fluctuating in recent years, but the province remains an attractive option for homebuyers, particularly first-timers. With its relatively affordable housing compared to markets like Vancouver and Toronto, Alberta’s new homebuyers stand to benefit significantly from the GST rebate.

According to the Parliamentary Budget Officer (PBO), more than 70,000 new homes across Canada are expected to qualify for the rebate during the lifespan of the program. While this estimate is lower than what the federal government anticipated, it still represents a substantial amount of savings for buyers, especially in areas like Calgary, Edmonton, and other growing regions in Alberta.

For a typical first-time buyer in Alberta purchasing a home at or below the $1 million mark, the full GST rebate could save them up to $50,000. This would be a huge relief for those looking to make the leap from renting to owning.

Qualifications for the Rebate

• Newly Built Homes: Only newly built homes qualify for the rebate. (GST is not owed on the sale of a previously owned home.) Homes purchased from May 27, 2023, through to 2031 are eligible, as long as construction starts before 2031 and finishes by 2036.

• Price Phases: The rebate is available for homes priced up to $1 million. For homes priced above $1 million but below $1.5 million, the rebate gradually decreases until it phases out at the $1.5 million threshold.

• Mortgage Savings: If the GST is rolled into the mortgage principal, the typical buyer could see savings of approximately $240 per month on mortgage payments. For many, this could be the difference between qualifying for a mortgage or not.

Supply and Demand

While the GST rebate is certainly a step in the right direction, experts caution that increased demand could lead to higher prices in some markets, at least in the short term. Economist Kari Norman from Desjardins Economics suggests that if the program proves popular, the additional demand could prompt builders to increase the number of new homes, which may help address the province’s housing shortage.

However, there is also the risk that increased demand might push home prices even higher, especially in cities like Calgary where the housing market is already competitive. The rebate could, therefore, help some buyers save on taxes, but it might not fully offset rising property prices caused by heightened demand.

Key Considerations for Alberta Buyers

1. Affordability: Alberta’s housing market remains relatively affordable compared to other parts of Canada, making it an attractive place for first-time buyers. However, the rebate could help bridge the gap for buyers looking at more expensive homes.

2. Timing: The program is set to run until 2031, which gives prospective buyers several years to take advantage of this opportunity. However, it’s important for buyers to consider the state of the market and plan accordingly.

3. Market Trends: As Alberta continues to grow and attract new residents, home prices may fluctuate. The GST rebate could help buyers absorb some of these fluctuations, but it’s essential to monitor housing trends closely.

The Federal Government’s Estimate vs. the PBO’s

While the federal government estimates that the program will save Canadians $3.9 billion over five years, the Parliamentary Budget Officer’s estimate is lower, projecting a $1.9 billion cost over six years. This discrepancy could be due to differing assumptions about how popular the program will be with first-time buyers. In Alberta, the success of the program will likely depend on local factors such as job growth, population influx, and the overall economic climate.

The federal GST rebate is a promising initiative for first-time homebuyers across Canada, and it has the potential to make a significant difference for many Albertans looking to purchase a new home. Whether the program will help ease Alberta’s housing affordability issues in the long term remains to be seen, but it’s certainly a step toward making homeownership more accessible.

For those looking to take advantage of this opportunity, the next few years could be crucial in securing a home at a more affordable price. However, it’s important to stay informed and be prepared for potential fluctuations in the market. As always, consulting with real estate experts and financial advisors will be key to navigating Alberta’s ever-evolving housing landscape.