How Canada’s 2025 Federal Budget Could Reshape Toronto’s Real Estate Market in 2026
TL;DR: The 2025 Federal Budget takes a swing at housing — scrapping GST for first-time buyers, pouring billions into new construction, and axing the federal vacant home tax.
If it passes Parliament (the Liberals are in a minority, so it still needs approval), these changes could reshape Toronto’s real estate landscape in 2026 — especially for new-build buyers, developers, and investors watching the next market turn.
🏠 A GST Break For First-Time Buyers
Ottawa’s latest headline grabber: no GST on new homes up to $1 million and a reduced GST on homes between $1 million and $1.5 million — but only for first-time buyers.
That’s not just good optics. It’s real money — roughly 4 to 5 percent off the purchase price of a brand-new condo or townhouse. In Toronto, where “starter home” and “seven figures” somehow share the same sentence, that’s meaningful.
Here’s the ripple effect:
Buyers finally get an affordability nudge big enough to matter.
Builders hit presale targets faster, unlocking financing for projects stuck in limbo.
Developers in the GTA’s condo belt — think Liberty Village, Junction Triangle, and Etobicoke’s waterfront — finally catch a tailwind.
It won’t turn renters into owners overnight, but it will grease the gears for both sides of the transaction. In Toronto real estate, that counts as progress — and around here, progress is practically a unicorn.
🧱 Billions Promised to Actually Build Something
If last year’s housing plan was a vision board, this one brings the cheque. Ottawa’s earmarking $7.4 billion by 2026-27 to get shovels moving again.
Where the money’s going:
Affordable Housing Fund – $1.66 billion: reviving stalled builds.
Housing Accelerator Fund – $1.08 billion: helping cities approve projects faster (miracle pending).
Apartment Construction Loan Program – $573 million: making rental development actually pencil out.
Indigenous Housing Initiatives – $1.6 billion: long-overdue and adds national supply.
In plain English: more mid-rise rentals, more infill, more cranes.
For Toronto and the 905, that means long-delayed six-storey rentals and stacked towns may finally break ground. It won’t flood MLS tomorrow — permits still move slower than traffic on the Gardiner — but by 2026, we could finally see fresh product hitting the market instead of endless “coming soon” signs.
💸 The End of the Federal Vacant Home Tax
The Underused Housing Tax (UHT) — Ottawa’s 1% penalty on vacant or underused homes owned by non-residents — is officially toast starting in 2025.
Did it work? Not really. It was confusing, hard to enforce, and barely moved supply. The 2025 Federal Budget makes it clear:
“No UHT would be payable and no UHT returns would be required to be filed in respect of the 2025 and subsequent calendar years.”
That means no more federal filings or payments after 2024. But don’t get too excited — obligations for 2022 to 2024 still stand, and anyone who skipped filing for those years still owes those returns (and penalties).
Ending the UHT sends two messages:
To investors: Canada’s back open for business. Less red tape, easier capital flow — a plus for developers needing deep-pocket partners.
To owners: one less cost of holding property, which makes keeping units long-term simpler (but potentially slows turnover).
It’s not a free-for-all, though. The Toronto Vacant Home Tax is completely separate — and very much alive. If your property sits empty for more than six months, you’ll still owe the city’s 1% annual levy.
The real win here is predictability. Fewer overlapping taxes, clearer rules, and a signal that Ottawa wants housing money flowing, not freezing — all of which give developers and investors more confidence to fund new projects.
🏦 Mortgage Oversight Grows Teeth
Buried in the budget’s fine print: the federal government will now apply anti-money-laundering laws to mortgage brokers, administrators, and private lenders.
Translation: cleaner money, safer lending.
Toronto’s housing market has seen its share of “creative financing,” and this change tightens the gate without slamming it shut. It’ll make mortgage lending more transparent and level the playing field for legitimate buyers who’ve been losing to riskier offers. Not glamorous policy — but genuinely useful.
🧭 What It All Means for You
This budget isn’t a magic wand, but it might finally be a steering wheel. If it survives Parliament, here’s how 2026 could shake out:
For Buyers
The GST exemption could shave tens of thousands off a new-build price.
As government funds reach construction sites, expect more inventory and slightly slower price growth by late 2026.
Mortgage transparency = fewer headaches and cleaner financing options.
For Sellers
The GST buzz may lift buyer confidence heading into 2026.
If rates flatten, early 2026 could be your sweet spot before new supply adds competition.
Pricing with strategy — not nostalgia — will matter more than ever.
🧮 The Bottom Line
The 2025 Federal Budget isn’t a silver bullet, but it’s the first serious attempt in years to treat housing as infrastructure, not decoration.
If it passes, 2026 could finally feel like a reset year — more balance, more building, fewer panic headlines.
If it doesn’t? Add it to the list of “almost fixes” in Canadian housing history.
Either way, waiting around isn’t a plan. Acting with context is.
Whether you’re buying before incentives kick in or selling while inventory’s still thin, strategy is everything right now. Book a quick strategy call today.
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Quick FAQ
Will the 2025 Federal Budget make Toronto homes more affordable?
Not overnight. The GST break for first-time buyers and billions in new housing funds could help soften price growth over time, but affordability still depends on interest rates, supply, and the economy. Think of this budget as direction, not a discount code.
When do these housing changes actually take effect?
If Parliament passes the budget, the GST exemption for first-time buyers and the elimination of the federal Underused Housing Tax start in 2025. The big housing and construction funds will roll out gradually, with most of the impact showing up in 2026 and beyond.
What happens to Toronto’s Vacant Home Tax?
The federal Underused Housing Tax is gone — but Toronto’s own Vacant Home Tax is still 100% in effect. That means if your property sits empty for more than six months, you’ll still owe the city’s 1% levy based on your assessed value.
Does this budget help or hurt real estate investors?
It’s a bit of both. Scrapping the federal tax and expanding financing tools helps investors and developers, but the new anti–money-laundering rules for mortgage lenders tighten the oversight. The message: bring your capital, but keep it clean.
Should I wait for the budget to pass before buying or selling?
Nope. The smart play is to plan before changes take effect. Whether this budget passes or gets tweaked, having a clear strategy means you can move fast when everyone else is still trying to Google what just happened.
