The publicly funded housing provider expects a bigger surplus for the next financial year due to rental increases and the provision of more subsidised flats for sale. The Housing Authority’s projected surplus for the 2017-18 fiscal year increases from HK$4.9 billion in the current cycle to HK$5.58 billion, as a result of a 10 per cent rise in public housing rentals in September last year and more subsidised flats for sale being made available in the coming years to meet the government’s long-term housing target. Regina Ip will risk ‘collusion’ criticism to engage Hong Kong tycoons on subsidised housing But the authority expects its total fiscal reserves to fall from the current level of HK$37.9 billion to HK$18 billion by 2020-21. The trend is based on the assumption that public housing rentals will remain unchanged while construction costs will continue to rise. The total construction cost from fiscal 2016-17 to 2020-21 is expected to reach HK$117.8 billion, with costs in the coming year totalling HK$23.7 billion. Professor Raymond So Wai-man, chairman of the authority’s finance committee, said the authority would have enough resources to achieve the public housing supply target in the next five years, but in the long run, the government would need to tap into the HK$74 billion housing reserve to fund future projects. So said the authority had not decided when to ask the government to use the reserve. “We will maintain close contact with the government [about the reserve],” So said. “So far we have enough resources to handle the challenges in the next five years. We believe we may not necessarily [start to ask the government] in the next one or two years.” Hong Kong can’t solve its housing problems without trade-offs So said the current cost of building a public rental housing flat was HK$870,000, while building a subsidised unit for sale would cost about HK$1 million. He expected costs to continue to rise. So said the authority had opted for a “safer” investment mode due to an uncertain international outlook, with 85 per cent of its portfolio going into low-risk foreign currency funds, instead of 70 per cent previously, 8 per cent in stocks and 7 per cent in Hong Kong and US dollar savings and bonds. The government announced last month that the housing supply target for the next 10 years would be maintained at 460,000 flats. That includes 280,000 units for public housing and 180,000 for private housing. But it also acknowledged that it had only identified enough land to build 236,000 public housing flats, meaning there was a shortfall of 44,000 units.