Winnipeg Free Press

Winnipeg Free Press (Newspaper) - August 07, 2013, Winnipeg, Manitoba C M Y K PAGE B3 OTTAWA - Canadians may soon be paying more for new home loans as Canada Mortgage and Housing Corp. begins to clamp down on guarantees for mortgage- backed securities. The government agency has notified banks, credit unions and other mortgage lenders they will each be restricted to a maximum of $ 350 million of new guarantees this month under its National Housing Act Mortgage- Backed Securities ( NHA MBS) program. This year, the federal Crown corporation was given authority to guarantee up to $ 85 billion under the program, but by the end of July, $ 66 billion had already been committed. " As a result of this unexpected increase in issuance volumes to date and to better manage volumes going forward, CMHC will be introducing a formal allocation process in late August," CMHC said in an Aug. 1 note to lenders. Analysts say the cap will make it harder and more expensive for banks to obtain funds to lend to their customers, which would likely be passed on by way of a bump in mortgage rates. " The combination of steps the government has taken in the last year, coupled with the beginnings of a sell- off in the bond market... will put a bit of upward pressure on mortgage rates," said CIBC chief economist Avery Shenfeld. " Overall, the days of very cheap mortgages are going to be replaced by cheap mortgages." TD economist Diana Petramala, who specializes in the housing market, estimated rates could rise anywhere from 20 to 65 basis points, or the equivalent of 0.2 to 0.65 of a percentage point. She noted that historically, this is a minor increase. " Affordability will still remain in the housing market," she said. The conversion of loans into securities with CMHC backing is a way for lenders to tap funds from a broad range of investors and enable banks to issue more mortgages at a lower cost. Analysts said Canadian banks should have no difficulty securing international markets for funding, but it will come at a higher cost. CMHCbacked securities are attractive for both banks and investors since they are largely default- proof. Fearing an overheated housing market could infect the larger economy and result in defaults the government must bear, Finance Minister Jim Flaherty has taken a number of steps in recent years to stem the flow of mortgage credit. Last summer, he introduced tighter rules for mortgage lenders and borrowers - a change the real estate and lending industries say was the main reason for a slowdown in residential property sales that began last August and continued through the first part of 2013. As well, the finance minister acted to limit taxpayer exposure to a housing crash by setting limits on banks' ability to buy bulk insurance from CMHC. Still, Flaherty has been frustrated that banks were priming the house- mortgage pump too aggressively, oblivious to the fact Canadian household debt continued to climb. At 165 per cent of annual income this spring, household debt reached heights similar to the peak in the United States prior to the 2007 crash that literally broke several banks. This spring, the minister went so far as to publicly chastise some banks for dropping their mortgage rates too low. The moves worked for awhile, but in the past few months, housing has been on an upswing, with starts again reaching unsustainable levels near 200,000 annually, sales picking up and prices continuing to record new highs. " We are starting to see the impact of the changes wearing off... Prices in most markets are now rising faster than income," Petramala said. " So it makes sense that the federal government, CMHC, may want to limit some of the risk- taking in the housing market." In last month's monetary policy report, the Bank of Canada cited the recent developments in the housing market as the top made- in- Canada risk to the economy. " This renewed momentum would produce a temporary boost to economic activity and inflation, but more importantly, it would exacerbate existing imbalances and therefore increase the probability of a more severe correction later on. Such a correction could have sizable spillover effects to other parts of the economy," the central bank concluded. - The Canadian Press BUSINESS EDITOR: SHANE MINKIN 204- 697- 7308 business@ freepress. mb. ca I MARKET DETAILS B4 I winnipegfreepress. com WEDNESDAY, AUGUST 7, 2013 B 3 A CONSORTIUM of local developers has unveiled an ambitious plan that would see a mixed- use, highrise tower - the first in the Exchange District - built inside the walls of one of the area's most historically significant and redevelopment- challenged buildings - the James Avenue Pumping Station. The proposal, unveiled at a public meeting Tuesday, would see the original brick structure and all original pumping equipment in the lower level retained. Rising from near the centre of the building would be a slender, 24- storey steel- and- glass tower that could include a mix of public, retail and office space on the lower levels and rental apartments and penthouse condominiums above. A spokesman for the developers said the public and retail space would be on the main and mezzanine levels of the existing building and on the main floor of the new building. It could include features such as an indoor- garden- style public gathering space, a restaurant/ bar suspended above the lower level of the pumphouse, some smaller caf�s or restaurants and some clothing stores. Several local groups have expressed interest in including a " water- interpretive centre" and museum. The latter would explain the history of the building and some historic events in the area, including the 1919 general strike. The consortium's spokesman, who didn't want his name published, said they're all local people who are withholding their names until they know if the project is a go. They hope to know sometime this fall. He said the apartments would be a combination of one- and two- bedroom units ranging from 600 to 1,150 square feet. They would require what the spokesman said is the going rate for new rental units in the city - $ 1,100 to $ 1,195 per month for a one- bedroom unit and $ 1,395 to $ 1,495 for a two- bedroom. He said the group has discussed its plans with officials from the city, CentreVenture Development Corp., Heritage Winnipeg, local historical groups and local retailers. " We wanted to get their input and see if they think we're moving in the right direction," he said, " and it's our understanding that they think we are moving in the right direction." He said if there's opposition to the plan, it will likely be over the height of the new building. He suspects some people, including some residents in the two neighbouring condominium developments - The Sky and The Strand - may argue it's incompatible with the area. But the building needs to be that height to accommodate enough apartments to make the project economically feasible, he said. " If we don't have the height, it won't be economical... and the show is over." That's what torpedoed most other redevelopment proposals that have surfaced during the last decade in which CentreVenture has been trying to find a way to save the existing building and equipment, which has been described as a rare jewel from the city's industrial era. CentreVenture currently owns the property, and the consortium's spokesman wouldn't say how much it will have to pay for property or how much the project is expected to cost. CentreVenture president and CEO Ross McGowan said in a written statement the agency has been working closely with the new group for nearly a year. " Their mixed- use proposal has merit and from our perspective. The redevelopment of the pumphouse has been a priority for Centre- Venture for many years," he said. " The removal of this blight amongst the private investment that has been made in the East Exchange and along Waterfront Drive, while preserving the historical elements, is essential. This development will provide additional residential density in this emerging neighborhood, benefiting the current residents and also provide another living option for people who are considering living downtown." Heritage Winnipeg executive director Cindy Tugwell said she also feels the proposal has merit and said she hopes it proceeds, especially in light of all the failed past proposals. " Everybody wants really badly for this to work," she said, " and I think it's great they're getting feedback from the area residents and stakeholders." Cecil Duncan, who lives in the neighbouring Sky condo development, attended Tuesday's open house and said he liked what he saw and heard. " Any new development is good for the area residents," he said. He said he has no concerns about the height of the proposed building. He conceded his condo faces the river, so the view wouldn't be obstructed by the new highrise. " But I also think it'd be a good tradeoff for more people and more activity coming to the area," he said. murray. mcneill@ freepress. mb. ca New rule may raise mortgage costs CMHC restricts lenders on value of guaranteed securities issued By Julian Beltrame Bold new plan for pumphouse Multi- use highrise within existing building envisioned Pumping station historic Here are some historical highlights in the life of Winnipeg's James Avenue Pumping Station: Designed . by city engineer Col. Henry N. Ruttan after a huge Main Street fire in 1904 revealed the city's artesian- well system couldn't produce enough water volume to fight a large blaze. Firefighters had to resort to using untreated river water to battle the fire and it ended up polluting the city's drinking water, causing a typhoid outbreak. The city decided to build a high- pressure pumping station and downtown firefighting system to address the problem. . The one- storey brick pumping station was built in 1906 at a cost of $ 1 million. . The massive generating and pumping equipment was imported from Scotland, England and the United States. A team of British mechanics was hired to install the equipment and operate it once the station opened in 1907. . The equipment was so large it had to be installed first and the building was put up around it. . The station had the capacity to pump up to 9,000 gallons of water per minute. It was the largest such facility in the world and one of only two ever built in North America. The other was in Chicago. . The firefighting system and pumping station were considered such an engineering marvel officials with the British Science Association made the then- difficult trip to Winnipeg in 1909 to tour the pumphouse and hold the association's annual general meeting. . The pumping station remained in use until 1986, when the city decommissioned it. - source: the Manitoba Historical Society ' If we don't have the height it won't be economical... and the show is over' JOIN THE CONVERSATION Is the proposal to build a residential/ commercial building atop the James Avenue Pumping Station, while preserving the historic building, the best development for that site? Go to winnipegfreepress. com and add your comments to the conversation By Murray McNeill SUPPLIED PHOTO An artist's conception of the highrise development proposed within the James Avenue Pumping Station's walls. B_ 03_ Aug- 07- 13_ FP_ 01. indd B3 8/ 6/ 13 11: 01: 15 PM ;