Hong Kong’s Housing Authority may need government money to build flats in second half of coming decade as construction costs increase
- Housing Authority says it has enough capital to build 94,000 flats planned for the first half of the coming decade
- In the second half of decade the number of units set to be constructed doubles and authority warns it may need funding
Hong Kong’s largest public housing provider has admitted it may need government money to build flats in the second half of the coming decade as construction costs are likely to double.
The Housing Authority could pay the estimated HK$147.2 billion (US$18.8 billion) to build 94,000 flats in the coming five years, but the construction costs became less certain for the period stretching from 2028 to 2033, when it planned to erect twice the number of units, finance committee chairman Professor Chan Ka-lok on Thursday said.
“The expected number of units of housing to complete in the second half of the decade will be double that of the first half, so the construction expenditure will substantially increase,” Chan said. “If the authority has insufficient capital in the future, we will apply for funding from the government.”
The government has identified sufficient land to build 360,000 public housing flats in the coming decade, but two-thirds of them will only be completed in the latter half.
The government in 2018 earmarked HK$82.4 billion of fiscal reserves for developing public housing and related infrastructure.
Chan added the authority would continue to adopt a prudent approach to managing its financial situation.
The cost to build a public housing flat has risen by 17 per cent this year, going from HK$650,000 last year to about HK$760,000, while the price of constructing a subsidised unit under the Home Ownership Scheme has increased from HK$760,000 to HK$900,000.
‘Some temporary public flats could cost more to build than permanent homes’
According to the authority’s estimate, its cash flow will peak at HK$63 billion next year owing to sales of subsidised housing and investment returns.
The cash flow will drop to HK$51 billion in 2024-25 and then increase to HK$58 billion in 2025-26 before falling to HK$49.7 billion by the end of March 2027.
Meanwhile, the authority expects to record a HK$5.7 billion surplus by March this year, 43 per cent less than the original estimate, owing to the delayed sale of subsidised homes amid the Covid-19 pandemic. The surplus is expected to increase to HK$19 billion next year.
The housing supplier expects next year’s public rental housing operation to have a HK$46 million deficit because of a rent waiver introduced under the pandemic. But the authority said subsidised flat sales and commercial property rent could offset the deficit.
Underprivileged youth call for Hong Kong to tackle housing crisis, boost handouts
Anthony Chiu Kwok-wai, one of the authority’s members, was concerned about the supplier’s future financial situation given the rising construction cost and stressed that the government had a responsibility to help.
Another member, veteran surveyor Lau Chun-kong, however, said he was not worried as one-third of the flats would be sold as subsidised housing and the income could support building public homes.
He added that the government could issue bonds to erect public homes in case the fiscal reserve for housing has been used up.
In Chief Executive John Lee Ka-chiu’s maiden policy address last October, he said the government aimed to reduce the waiting time for both permanent and temporary public flats to 4½ years by the 2026-27 financial year with 30,000 temporary homes built in five years. The wait for a permanent public rental flat is currently 5.6 years.
