Toronto New Home Prices Jump As Builders Absorb HST Rebate

Greater Toronto real estate printed stronger numbers across the board last month. BildGTA and Altus Group data shows new home prices climbed in April, with stronger sales and less inventory. Has the market risen from the dead? Before getting excited, it’s worth diving into the data, as a little context may take the wind out of your sails. 

Greater Toronto New Home Prices Rise After HST Rebate Quirk

Source:  Altus Group. 

The asking price of a new home climbed last month across Greater Toronto. A typical single-family home climbed 0.6% (+$8.0k) to $1,421,835 in April, a 7-month high. Prices remain 7.1% (-$108.3k) lower than last year, and 26.5% (-$512.1k) below the record high reached way back in mid-2022.  There are a few caveats, but let’s talk about new condo prices first.

New condo prices also moved higher—just at a slower pace. The price of a typical new condo climbed 0.2% (+$1.7k) to $1,029,164 in April, also a 7-month high. The benchmark is actually 1.0% (+$10.0k) higher than last year, though it remains 13.6% (-$162.6k) below its mid-2022 peak. 

Now, back to those caveats. As always, it’s worth noting the Altus new home benchmark is an average of the advertised asking price. Unlike the CREA benchmarks, they aren’t based on sales, nor are they adjusted for size or quality. It’s also quite the coincidence that the price per sqft page was recently stripped from the releases. 

That said, prices are actually rising. The climb began before sales picked up, in response to Ontario’s expanded HST rebate. Rather than buyers getting a discount, real estate professionals warned prices were hiked to consume the rebate. This quirk exists because new homes are often advertised with HST-inclusive pricing. Instead of buyers paying the tax out of pocket, builders ask buyers to sign over their rebate on closing. The expanded rebate means the government will write a bigger cheque, which means builders can raise their sticker price to absorb those juicy rebates directly. At least one Big Six bank called the program a “builder bailout.” 

On the topic of Big Six banks, the HST rebate expansion landed at a curious time. By increasing the sticker price, it bolsters the appraisal prices. It conveniently comes shortly after the regulator threatened banks over using inflated appraisals. They had been using old blanket appraisals to artificially inflate the asset value. As a result, a number of projects are suspected to be backed with zero equity, contrary to the Bank Act. Now that those inflated appraisals have disappeared, taxpayers are picking up the tab to help taxes get rolled into the values. Surely just a coincidence, but we digress. Onward!

New home sales are firming, more than doubling (+255%) from last year to 1,100 units in April. Before getting overly excited, last year was a freakishly weak month for the industry. It was the biggest April since 2023, but it was less than halfway to matching those levels. Ditto with the 10-year average, and we could only find 3 weaker prints for the month in the past 20 years. In short, things are getting better—but they’re far from good. 

Remarkably, only 48 of the 1,100 units sold in April were in the City of Toronto. It’s 26.3% higher than last year, but also just 4.4% of total new home sales in the region. A fact made even more impressive when you realize that nearly half of the region’s population is in the City. 

The demand rut has led to a number of project cancellations and delays, helping to firm inventory. There were 19,044 units for sale in April, down 10.9% from the record high set last year. It was also the weakest April since 2023 for listings, but the market is a long way from being in a supply shortage. For context, last month was double the inventory seen during the month’s record low in 2022, and 38.9% higher than 2019. The market’s health is still returning slowly, but there’s no mad dash declaring the market is reignited. 

New home sales climbed, prices are up, and inventory is down. That sounds great, but as you just saw—the details were much less impressive than they sound. Prices are rising on a technicality, even before demand. Sales remain historically weak and inventory is still near record highs. Pent-up demand often returns once the market shows signs of life, but it’s not clear if that still happens if those signs are manufactured.