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

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.