Ontario will have to follow BC in taxing foreign home buyers in order to cool the Greater Toronto Area housing market according to CIBC economist Benjamin Tal.

In a client note, Tal said that as evidence is starting to reveal an impact on the Vancouver market following the introduction of a 15 per cent tax, Ontario will have “little choice but to do the same.”

His assessment of the current state of the market and household debt is that there is a real risk ahead for the economy from large mortgages held by an increasing number of homeowners in the hottest markets.

While defaults may not rise sharply, higher interest rates could mean lower consumer spending on other items as servicing debt takes a larger chunk of household incomes.

This, Tal warns, could lead to recession and he is calling on the government to take action to make borrowing harder.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

More market watch: