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1. Housing Authority endorses budget for 2006/07

1. Housing Authority endorses budget for 2006/07
Hong Kong Government, 20 January 2006

The following is issued on behalf of the Housing Authority:

The Housing Authority at a meeting today (January 20) endorsed the Revised Budget for 2005/06 and the Proposed Budget for 2006/07.

The 2005/06 revised budget shows a consolidated operating surplus of $16.3 billion, higher than the approved budget of $15 billion, mainly due to higher one-off divestment proceeds and alienation premium partly offset by lower Commercial operating surplus upon divestment in November, 2005, (earlier than March, 2006 as assumed in the 2005/06 approved budget).

The consolidated operating surplus drops to $970 million in 2006/07 mainly due to full recognition of divestment proceeds in 2005/06 and a decrease in operating surplus from the Commercial business.

"In the next five years, the average construction expenditure is $5.7 billion per year in producing adequate PRH flats (average annual production at 16,000 flats) to maintain the average waiting time at around three years," a spokesman for the Housing Authority said.

The cash balance is anticipated to be $50.2 billion by end of March, 2006, and $58.8 billion at the end of March, 2010. One of the major assumptions is the sale of 2,000 surplus HOS flats in each year from 2007/08 onwards before a decision on the actual disposal programme is made.

Stressing that the proceeds from divestment was one-off only and the surplus Home Ownership Scheme (HOS) flats would also be sold out ultimately, the spokesman said that external factors such as inflation rate and investment return could also have impact on the authority’s long term finance condition.

"Although its financial situation has become more healthy and sustainable in the short to medium term, the Housing Authority has to exercise prudence in handling its cash balance to maintain a sufficient level of working capital to meet its recurrent and capital expenditure as well as fulfilling its commitments to meet its policy pledge," he said.

"The spending of public funds should be well justified and focused on those who are in genuine need for public housing. The authority will continue to review how to utilise its available resources to maintain the sustainability of the public housing programmes in the longer term," he added.