HONG KONG, May 28, 2024 - (ACN Newswire) - On May 23, 2024, China’s KE Holdings Inc., also known as Beike (NYSE:BEKE; HKEX:2423), released its financial results for the first quarter of 2024. The better-than-expected results show that despite market volatility, the company’s core housing transaction services business has demonstrated strong resilience. Meanwhile, a series of favorable real estate policies recently introduced have also brought positive sentiment among investors.

Additionally, investors are increasingly optimistic about Beike’s new initiatives such as home renovation, furnishing, and rental services, which have surpassed brokers’ estimates. In the first quarter, revenue from the home renovation and furnishing business reached RMB2.4 billion, a 71.1% year-over-year increase. Revenue from home rental services reached RMB2.6 billion, marking a 189.3% year-over-year rise. These positive trends suggest a robust outlook for the emerging segments moving forward.

Resilient Performance in Core Transaction Business

In the first quarter, Beike achieved a gross transaction value (GTV) of RMB629.9 billion (US$87.2 billion) approximately. This represented a year-on-year decrease of 35.2% but outperformed the general sales trend among major developers. The sharp decrease was mainly due to the release of pent-up demand after the relaxation of COVID-19 control measures last year, with transaction activities peaking in February and March, resulting in a high base in the first quarter of 2023.

During the first quarter of 2024, the existing home transaction market performed steadily, with various local governments implementing optimized policies. The rigid demand group also actively entered the market due to the decrease in mortgage interest rates and property price adjustments, with new home demand shifting towards the second-hand housing market, as homebuyers preferred readily available used homes.

According to Beike’s platform data, the transaction volume of existing homes exceeded that of new homes in 74 cities, and the transaction volume of existing homes achieved year-over-year growth in 16 cities despite an abnormally high base from the first quarter of last year.

A steadily rising existing homes market, combined with a series of supportive policies for new homes market, indicate that an improving sentiment towards the Chinese real estate sector.

Beike’s existing home transactions GTV experienced a 31.8% year-on-year decline in the first quarter, reaching RMB453.2 billion (US$62.8 billion). The profit margin for this segment remained stable at 44.5% compared with recent quarters. Meanwhile, Beike’s GTV for new homes reached RMB151.8 billion (US$21.0 billion). To effectively manage risks, Beike has continuously refined its new home business operations.

Cautious Optimism Amid Policy Changes: Substantial Homebuying Demand Provides Stability

Recent government policies have provided a welcome boost to the Chinese real estate market. These measures include easing mortgage down-payment and interest rate requirements, as well as potentially encouraging local governments and state-owned enterprises (SOEs) to purchase unsold housing inventory. Investors are betting that these positive signals will finally help the property sector climb out of its downturn.

On May 17, 2024, the People’s Bank of China announced an RMB300 billion (around US$41.5 billion) relending program to help SOEs buy unsold homes. This initiative represents the Chinese government’s most significant effort to date to rescue the real estate sector and stabilize the broader economy.

Following the new policy measures announcement, data indicated that the volume of inquiries at real estate brokerage offices in major Chinese cities has risen. This suggests underlying demand for residential real estate among households remains substantial, despite some potential homebuyers adopting a cautious, wait-and-see approach. Moreover, the pent-up demand built up over the past several years could potentially provide a degree of stability to the overall real estate market environment and support a future recovery.

According to analysts, the removal of the mortgage rate floor and easing mortgage rates for housing provident fund loans are positive for boosting homebuyers’ sentiment. That said, industry experts also noted that the cautious sentiment that has gripped the real estate market for several years will take time to reverse, as evidenced by April’s market data. However, government policy support is gradually filtering through the economy, and the impact of these measures is expected to become more apparent in the months ahead.

Analysts believe the government’s recent real estate policies will help the property market bottom out earlier than originally expected, potentially as early as the end of 2024.  These policies, which are seen as crucial for addressing the challenges facing the sector, are expected to improve the balance between supply and demand in the real estate market.

Positive Industry Outlook

Many expect the government to roll out additional supportive policies before the end of this year, if not earlier, to further bolster the real estate sector’s recovery. The only question is when. This is expected to benefit Beike, China’s largest online and offline housing transactions and services platform, as it stands to gain from the recovery of the housing market.

Beike’s strong balance sheet and rapidly growing renovation and rental businesses make it one of the safer investment bets for those who believe the sector’s recovery is underway.

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