Garry Marr: Why selling your ‘used’ home is harder than ever

I have a “used” house. At least that’s what a friend with an affinity for new properties calls my approximately 40-year-old home.

For years, it was a running joke, referring to an existing home the way you would talk about pre-owned clothes or a car. It’s an odd choice of wording in a country where roughly 500,000 resale homes change hands annually, while fewer than half as many new homes are built.

Still, there will always be something appealing about owning something brand new. Now Ottawa and Ontario have tilted the scales toward new housing by eliminating the harmonized sales tax on homes worth up to $1 million, a move worth as much as $130,000 in Ontario and clearly aimed at reviving Toronto’s moribund condo construction market.

Condo research firm Urbanation recently painted a bleak picture of the sector. Just 246 new condominium units sold in the Greater Toronto and Hamilton Area in the first quarter, down 52 per cent year over year and 94 per cent below the 10-year first-quarter average of 4,046 sales.

There is now a glut of unsold condos. Prices were already falling, and the tax break has dramatically narrowed the gap between buying new and buying resale.

Developers still adjusting to the new price reality need to wake up quickly, said Ben Myers, president of Bullpen Consulting, calling the market peak of 2021 a “mirage” that is no longer relevant.

“They need to mark down prices to at or only slightly above the resale market,” Myers said. “Now is the time to do it, if you really want to move those units with the HST holiday.”

The tax holiday applies to purchases made between April 2026 and March 31, 2027, dates that have already caused frustration among buyers who signed deals before the rebate was announced.

It has also raised a difficult question for those who bought into the condo market over the past decade but are considering selling: How can you compete with a brand-new unit selling for almost the same price?

“The value isn’t much different,” Myers said. “You probably have additional smart features and some amenities that were not offered five years ago.” New homes also come with warranties, though buyers may hesitate if construction on the building is still ongoing.

Today’s condo projects are also much larger than they were a decade ago. Older buildings with fewer units can still appeal to buyers seeking a less crowded living environment.

Robert Hogue, assistant chief economist at Royal Bank of Canada, said he has heard stories of tension within condo developments where owners who bought earlier are upset to see newer purchasers paying less after tax.

“There are some frustrated buyers who paid their deposits,” Hogue said. Developers with signed contracts are largely forced to tell those buyers that the timing is unfortunate.

Even so, Hogue questions how much enthusiasm the tax break will ultimately generate.

“It is being seen as helping to draw down unsold inventory in the condo market , but there is a lot of skepticism,” he said, calling it a “long shot” to revive condo presales.

The industry is still waiting for legislation and details surrounding the rebate program. Real estate lawyer Lorne Shuman noted Ontario already has some rebates for new homes, but there is still uncertainty about how this latest measure will work in practice.

“The important thing is for your lawyer to review the agreement and get clarification from the builder as to whether you are getting the rebate on closing,” Shuman said.

At the moment, no official forms are available, meaning buyers may initially have to pay the tax and later apply for reimbursement.

Stefano Guglietti, vice-president of sales at Rosehaven Homes, called the HST rebate the biggest tax break he can remember for the home-building industry.

“It is making a big difference,” Guglietti said, noting builders are already marketing homes by highlighting the before-and-after impact of the tax savings. “It’s helping more with inventory. If you have a couple of units left, it will move the needle.”

The rebate could also attract institutional investors. Two private equity funds, one targeting $500 million in purchases and another targeting $1.3 billion, have announced plans to buy unsold condos, and other private equity groups are reportedly circling.

Developers have already converted some planned condo projects into rental apartment buildings, but demand for individual investor-owned rental condos may remain limited in a weakening rental market . Rentals.ca reports rents have now declined year over year for 19 consecutive months.

“If I have a 500-unit condo building, am I going to sell 500 units to the rental pool?” Guglietti said, questioning the rationality of such a move.

Sue Wastell, second vice-chair of the Ontario Home Builders’ Association and president of Wastell Homes, said the rebate has already helped move projects that had been sitting unsold for years.

“Unfortunately, we have people sitting on the sidelines who want to wait until all the documentation is available before they sign a purchase-and-sale agreement,” Wastell said. “Until we know that, we won’t know the full effect. But most of us are going to try and move as much inventory as we can over the next year.”

She argues that while the rebate may look like a windfall for builders, construction costs have risen dramatically over the last five years, creating a significant price gap between new and resale homes.

“These HST savings have allowed us to close the gap, and we are back in line with the resale market, so it is apples to apples,” she said.

Daniel Foch, chief real estate officer at Valery Real Estate Inc., said it is still too early to measure the full effect on resale housing, but demand has softened this year.

“It’s possible some of the demand is getting pulled to pre-construction, and we have seen builders reduce prices, and it’s a real thing,” Foch said. “Buyers are being rational consumers and saying, ‘I can buy a new house instead of resale. Why wouldn’t I?’”

That could place even more downward pressure on the resale market.

At least in the short term, owners of “used” homes may find themselves struggling to compete with shiny new properties carrying generous tax savings. But today’s brand-new condo eventually becomes tomorrow’s resale listing.

At some point, every home becomes used.

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