Drop in sales takes toll on housing surplus

The Housing Authority has projected a surplus of HK$5.7 billion for the 2022-23 fiscal year - about 40 percent less than the original estimate according to Chan Ka-lok, chairman of the authority's finance committee.

Speaking after the committee endorsed a budget for the coming year and forecasts for the next five years, Chan said the shortfall was caused by a decline in sales of flats under the Home Ownership Scheme.

The HK$5.7 billion surplus to be recorded in March this year is expected to increase to HK$19 billion in the fiscal year starting in April.

But the authority's public rental housing account is expected to remain in the red for four consecutive years due to a pandemic-related public housing rent waiver, Chan said, with the deficit expected to increase from HK$46 million in 2023/24 to HK$2.08 billion in 2026/27.

"But this deficit will be offset by income from commercial properties and subsidized home ownership," he said.

Chan also expects construction spending to meet the SAR's demand for housing to increase from HK$17.6 billion in the 2022/23 fiscal year to HK$40.6 billion in 2026/27.

Construction costs for a public housing unit have risen 17 percent year on year to HK$760,000, while the cost of building a flat under the HOS is HK$900,000 after an 18-percent rise.

He also said the authority's cash and investment balance, at HK$58.9 billion last year, will decrease to HK$51 billion in 2024/25 and increase to HK$58 billion in 2025/26 before dropping again to HK$49.7 billion by March 2027.

Chan said the authority will not have to ask the administration, which earmarked HK$82.4 billion in fiscal reserves in 2018 for public housing development, for additional funding in the short term as it is able to pay the HK$147 billion needed to build 94,000 apartments over in the next five years.

But construction costs for the next five-year period are expected to double, with 200,000 apartments to be completed from 2028 to 2033.

Those projections do not take into account 360,000 flats to be built over the next 10 years under the long-term housing strategy announced by Chief Executive John Lee Ka-chiu in his policy address.

He also said the authority's financial status will not have an impact on rental costs for public housing, explaining: "We assess the affordability of the tenants based on their income every two years and necessary adjustments."

Members of the authority will discuss the budget and financial forecasts on January 16.