The Housing Authority has revised the consolidated operating result for its 2006-07 Budget to a $600-million deficit, while the figure for 2007-08 is expected to be a $1.7-billion surplus.

The authority endorsed the 2006-07 Revised Budget and the 2007-08 Proposed Budget today.

In the five years from 2006-07 to 2010-11, the authority will incur an average construction expenditure of $6 billion a year to produce adequate public rental housing flats to maintain the average waiting time at about three years. This means an annual production of more than 15,000 flats on average.

Lower rental income

The consolidated operating result in the 2006-07 Revised Budget shows a $600-million deficit, compared with the consolidated operating surplus of $1 billion in the Approved Budget, mainly due to lower rental income as a result of the one-month rent holiday to be granted to public rental housing tenants in February.

The consolidated operating result in 2007-08 shows a $1.7-billion surplus, mainly due to the sale of surplus Home Ownership Scheme flats from this year onwards. It is expected the consolidated operating result will show a surplus of $2 billion in 2008-09 before it turns to a deficit of $400 million in 2009-10 and $1.2 billion in 2010-11, mainly due to the gradual sale of surplus HOS flats and the effect of the proposed across-the-board rent reduction of 11.6% for public rental housing units.

The forecast cash balance is $52.1 billion by the end of March this year and $69.9 billion at the end of March 2011, mainly due to investment return and sale of the surplus HOS flats.

Prudent management

With the proceeds from divestment of its properties and sale of HOS flats from this year onwards, the authority's finance has become more sustainable in the short and medium term.

However, the surplus HOS flats will be sold off by 2010-11, and investment return and external factors, such as inflation, may have a significant impact on the authority's financial conditions. The authority has to maintain a sufficient level of working capital in a prudent manner to meet its recurrent and capital expenditure in fulfilling its policy pledge.

The spending of public funds must be justified and focused on those who are in genuine need of public housing.

The authority will continue its review of how to utilise its available resources to maintain the sustainability of the public housing programmes in the longer term.