Ontario Lowers Home-ownership Costs for First-Time Buyers

Aman Sethi, Realtor | Published: October 28, 2025 | Toronto

In a significant move to tackle housing affordability, the Ontario government announced a major policy change aimed at easing the financial burden on first-time home buyers. Beginning January 1, 2026, the province will eliminate the eight per cent provincial portion of the Harmonized Sales Tax (HST) on the purchase of new homes for eligible first-time buyers. The change is expected to make new home-ownership more attainable amid record-high housing prices and rising living costs (Government of Ontario, 2025).

A Major Tax Relief for Home Buyers

Currently, new homes in Ontario are subject to a combined 13 per cent HST — five per cent federal and eight per cent provincial. While the federal government offers partial rebates, many first-time home buyers still face steep upfront costs. The removal of Ontario’s provincial portion effectively reduces the HST on new homes from 13 per cent to 5 per cent, translating to potential savings of up to $80,000 on a new home purchase (CBC News, 2025).

According to the provincial government, this measure aims to help young families and first-time buyers get into the housing market sooner. “By cutting the provincial portion of the HST for first-time buyers, we’re putting money back into people’s pockets and helping them achieve the dream of home-ownership,” said Premier Doug Ford during the announcement (Government of Ontario, 2025).

Impact on Ontario’s Housing Market

Industry experts have welcomed the decision, suggesting that the move could stimulate demand and boost new home construction. The Mortgage Professional Canada Association noted that this tax cut is one of the most substantial affordability measures introduced in recent years (Mortgage Professional America, 2025).

However, economists also caution that while the rebate will make buying more affordable in the short term, it could also lead to increased demand, which may push housing prices upward if supply does not keep pace (Toronto Star, 2025). Developers have similarly emphasized the need for complementary policies that increase housing supply, such as streamlining zoning approvals and accelerating infrastructure investments.

What This Means for First-Time Buyers

For many Ontarians, especially young professionals and families, the cost of buying a first home has become increasingly out of reach. In cities like Toronto, the average home price remains well above $900,000, even after a modest correction from the pandemic-era peak (BlogTO, 2025).

The removal of the provincial portion of the HST could significantly reduce upfront costs, allowing buyers to redirect funds toward down payments or mortgage payments. For example, a new home priced at $1 million currently incurs $130,000 in HST. With the provincial 8 per cent removed, that tax drops to just $50,000 — a potential savings of $80,000 (CBC News, 2025).

This measure will apply only to first-time buyers purchasing new homes, meaning resale homes will remain unaffected. The province expects the policy to benefit tens of thousands of households each year and stimulate new home construction across Ontario’s growing regions, including the Greater Toronto Area (GTA), Ottawa, and southwestern Ontario.

The Broader Affordability Context

Ontario’s move comes amid ongoing affordability challenges across Canada. The Bank of Canada’s recent decision to lower its key policy rate to 2.25 per cent is already helping reduce borrowing costs (Bank of Canada, 2025). Combined with the HST reduction, first-time buyers could see a double benefit — lower mortgage rates and lower purchase costs.

Critics, however, argue that the policy does not address the root causes of housing unaffordability, such as land scarcity, regulatory bottlenecks, and high construction costs. “Tax relief helps buyers, but unless we build more homes faster, affordability will remain an issue,” said one real estate analyst quoted in the Toronto Star (2025).

A Step Toward Hope

Despite its limitations, the provincial HST cut represents a tangible step toward improving affordability for first-time buyers. It signals the Ontario government’s acknowledgment of the financial pressures faced by younger generations struggling to enter the housing market.

By reducing one of the largest closing costs on new home purchases, the province is not only supporting first-time buyers but also sending a clear message to developers to accelerate construction. If paired with continued efforts to increase housing supply, streamline approvals, and enhance infrastructure, this initiative could mark a turning point in Ontario’s housing affordability landscape.

As Ontario moves forward with this policy, home buyers, builders, and industry stakeholders alike will be watching closely to see how the market responds — and whether the dream of home-ownership will finally become more attainable for a new generation of Ontarians.

References

Bank of Canada. (2025, October 29). Bank of Canada lowers policy rate to 2¼%. https://www.bankofcanada.ca/2025/10/fad-press-release-2025-10-29/

BlogTO. (2025, October 28). Ontario HST cut could drop home prices by up to $80K. https://www.blogto.com/city/2025/10/ontario-hst-cut-home-prices-80k/

CBC News. (2025, October 28). Ontario to remove 8% provincial HST for first-time homebuyers. https://www.cbc.ca/news/canada/toronto/ontario-first-time-homebuyer-hst-rebate-9.6956917

Government of Ontario. (2025, October 28). Ontario lowering costs for first-time home buyers. https://news.ontario.ca/en/release/1006665/ontario-lowering-costs-for-first-time-home-buyers

Mortgage Professional America. (2025, October 28). Ontario moves to ease homeownership costs for first-time buyers. https://www.mpamag.com/ca/mortgage-industry/industry-trends/ontario-moves-to-ease-homeownership-costs-for-first-time-buyers/554601

Toronto Star. (2025, October 28). Ontario to remove eight per cent provincial portion of HST for first-time buyers. https://www.thestar.com/politics/provincial/ontario-to-remove-eight-per-cent-provincial-portion-of-hst-for-first-time-buyers/article_3f34bd32-706e-4cec-8177-d69004091117.html