The surge

Spoiler alert. The doomers will hate this post. Turn back now.

In a three-month period, sales of new-build houses in the vast GTA market increased by 130%. No typo. The 8,410 transactions dwarfed the 3,645 deals that people signed in the same period (Q2) last year.

The developers and construction guys say this flurry of offers saved 17,300 jobs and preserved close to $3 billion in GDP. That may be industry hyperbole, but if you’re a drywaller or a tile dude, you know if you’re working or not. And you are.

But at the same time, sales in the used-house market have been far more tepid. Yes, they have been creeping higher in this market, but no 130% explosion. And new-builds ain’t cheap. The typical house with dirt is close to $1.5 million with condos last touching seven figures, on average.

So what happened?

One thing. A tax rebate. Of those 8,400 sales, says economist Peter Norman, almost 5,000 were due to the tax break. The construction industry is calling it “an historic buying opportunity” which it says, “cannot be understated.”

So what is this program? What does all this tell us?

The feds announced that the 5% GST on new houses would be stripped away for a year. Ontario agreed to dump its 8% provincial sales tax for the same period. The result is a rebate program that wipes away up to $130,000 in the harmonized HST (that’s GST + PST) – an amount that comes right off the advertised price of a fresh condo or single-family home.

The rebate is staggered. For properties selling at $1 million or less, the full $130,000 reduction applies. Up to $1.5 million the price comes down by a flat $130,000 with buyers paying the additional sales tax. By $1.85 million the rebate scales back to $24,000. Above that amount the tax gift is capped at that level.

Anybody can buy and get the rebate – this is not for newbies only. But the property must be used as a principal residence by the buyer or a direct family member (no rentals). The offer must be penned by the end of March and an unbuilt property needs to be up by the end of 2031.

By the way, the rebated tax is assigned to the builder by the province and the feds, who just applies it to the price of the home upon closing. So the process is seamless and almost paperless for the purchaser.

There are some lessons here.

First, it makes more sense to find ways of making housing cheaper to buy than spending many billions on propping up developers or subsidizing cities. Cutting taxes is powerful. There is less distortion in the market. More equity for taxpayers. Less bureaucracy and cost.

Second, people want real estate. They always do. It’s in our DNA. The vast majority are not fussed by war, macroeconomics, Trumpian antics, trade wars, fiat currency devaluation, generational unfairness or the inevitable collapse of capitalism like the cerebral losers in the steerage section. They just want a backyard for the kids and a bedroom for the dog. Or vice versa.

This goes to the narrative a certain pathetic blog has been espousing of late. This real estate correction is in its final stages. Resale home prices are generally 20% to 30% less than they were four years ago, following the pandemic. Inflation is subdued. Mortgage rates are stable. Wage gains have surpassed the hike in living costs. It’s inevitable that declines in property values will end and demand will then increase.

The simple fact a tax break of 13% on new homes – which have declined in value only one-third as much as resales – can jump sales by 130% is telling.

It’s hard to suggest this. But here goes…

Did the government just do something right?

About the picture: “Between the 6th and 7th holes of the local golf course, you will find the sweetest of pooches just waiting on her bench by the fence,” writes Brent (somewhere in BC without telling us what golf courtse this is). “Some busy days there is a lineup of willing dog lovers waiting to give him a lucky scratch behind the ears.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/08/13/the-surge-3/