Challenging period ahead, warns Housing Authority as it reveals shrinking surplus

Building push will see surplus balance fall by 83 per cent over four years to HK$958 million

PUBLISHED : Tuesday, 07 January, 2014, 10:59am
UPDATED : Wednesday, 08 January, 2014, 4:53am

The Housing Authority's surplus and its cash balance will drop sharply over the next four years and it has not ruled out having to ask for funding from the government to meet construction targets, according to its latest financial forecasts.

It insisted that it remained financially healthy and that measures to raise revenue and cut costs would be taken before it requested government cash.

Its budget proposal for the 2014/15 fiscal year, which starts in April, was unveiled by the authority's finance committee yesterday, along with forecasts for the following three years.

The committee expects an overall consolidated surplus of HK$3.7 billion in the coming fiscal year, down nearly 35 per cent from this year's revised budget surplus of HK$5.65 billion.

The drop in surplus is mostly attributable to a rise in the deficit of its public rental housing account. It is forecast to hit HK$1.64 billion next year, more than double the HK$800 million in the revised budget for the current year.

The overall consolidated surplus is projected to decline further to HK$958 million in 2018. This would mean a decline in surplus of 83 per cent over four years.

Behind the figures is the government's plan to increase public rental housing production in order to meet rising demand. The Leung Chun-ying administration had pledged to build an average of 15,000 public housing flats for rent each year until 2017, then rising to 20,000 a year.

The figures have not taken into account any initiatives that may be rolled out following a report due in March from the Long Term Housing Strategy Steering Committee (LTHSSC).

"There are a lot of uncertainties ahead because the LTHSSC has not yet released its public consultation report," said the authority's finance committee chairman Professor Raymond So Wai-man, as he announced the budget proposal. He is also a member of the LTHSSC.

Currently, the authority raises revenue from leasing public housing and commercial properties, sales of Home Ownership Scheme flats and investments.

So stopped short of naming the odds of the authority requesting a handout from the government. He said it would first consider using cheaper construction materials, reorganising manpower and reducing expenses.

According to the forecasts, the authority's cash and investment balance will drop by 9.4 per cent to HK$61.7 billion in the next year. By 2018 , it will have dropped to HK$28.3 billion - the lowest since 2005, when it stood at HK$14.9 billion.

So vowed rents and public housing waiting times would not rise. "Even in the event of a deficit, we won't stop doing what we should be doing," he said.

Wu Chi-wai, deputy chairman of the Legislative Council's housing panel, said "At present, [the authority] still enjoys a surplus earned from The Link Reit sale [when public property was privatised through the real estate investment fund in 2005] … However, there are two variables to watch out for, namely the rise in construction costs and changes in the market for Home Ownership scheme flats."