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An estimated HK$27 billion would be injected as the first payment into a new "housing reserve" to help the Housing Authority meet the government's goal of building 290,000 public flats in the next decade. Photo: Felix Wong

Hong Kong's financial surplus will be used to meet multibillion-dollar construction target

Government's multibillion-dollar injection into 'housing reserve' to meet building target will not affect other public services, says John Tsang

Financial Secretary John Tsang Chun-wah expects Hong Kong to have a financial surplus in each of the next three fiscal years, allowing the government to "save up" in advance for public housing plans without sacrificing other services.

Tsang's comment came after it was revealed on Thursday that an estimated HK$27 billion would be injected as the first payment into a new "housing reserve" to help the Housing Authority meet the government's goal of building 290,000 public flats in the next decade.

" I expect [the public finance] should be able to achieve a surplus every year in my remaining term of three fiscal years," Tsang wrote on his blog yesterday.

"[The government] is able to reserve in advance public housing expenses without affecting other public services."

Financial Secretary John Tsang Chun-wah expects Hong Kong to have a financial surplus in each of the next three fiscal years.
But he warned that the government would face more financial challenges from an ageing population in the future and urged the Housing Authority to increase its cost-effectiveness.

He expected that the authority would face a financing gap of HK$100 billion under the government's plan, after using billions from its current reserves and the revenue from selling subsidised flats under the Home Ownership Scheme. It means the first injection, which represents this year's investment return on the government's vast fiscal reserves, would only make up a small part of the total needed to meet the housing target.

"Relying on the financial ability of the Housing Authority would not be sufficient, it would require the government injection to achieve [the target]," Tsang said.

Deputy Secretary for Transport and Housing Agnes Wong Tin-yu disclosed on RTHK yesterday that the Housing Authority had sufficient reserves to cope with its work until 2017/18, after which the balance would drop due to the large number of building projects.

She said the average cost to build a public flat and a subsided apartment for sale was around HK$700,000 and over HK$1 million, respectively, but some small or "tricky" construction sites would increase the building costs of each flat.

Dr Lau Kwok-yu, City University's associate professor for public policy, said the building cost for some flats under the subsided ownership scheme cost as much as HK$2.1 million, while they were being sold at around HK$2.6 million. "The cost was surprisingly high, and in this way the Housing Authority would not be able to gain much profit under the scheme. It would have to rely heavily on public funding." Lau said.

Lau suggested the authority partner with private investors in the building of subsided flats to boost income and housing supply, and to introduce rent controls to help those paying high rent while waiting for public rental housing.

Meanwhile, housing minister Professor Anthony Cheung Bing-leung has responded to criticism of the government's long-term housing strategy for failing to address the needs of residents in subdivided flats.

He explained that the government did not mean to establish a licensing scheme to outlaw substandard flats as the initiative might increase the cost of the flats and bring down the supply, which would ultimately push up rents.

This article appeared in the South China Morning Post print edition as: HK$100b needed to meet flats goal
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