Ke Holdings Inc

HKEX:2423

Earnings Call Analysis

Strong Q2 Performance and Strategic Growth Initiatives

In the second quarter, the company saw significant improvements across various metrics. Net revenue grew by 19.9% year-over-year to RMB 23.4 billion, driven by strong gains in home renovation and rental services, which increased by 57.8%. Gross profit increased by 22% to RMB 6.5 billion, with gross margins improving to 27.9%. Notably, GAAP net income rose by 46.2% year-over-year to RMB 1.9 billion. The company also announced a substantial expansion of its share repurchase program, raising it from USD 2 billion to USD 3 billion, extending until August 2025. These results highlight the company's strong execution and market outperformance.

Strong Growth in Revenue and Profitability

In the second quarter of 2024, the company demonstrated robust financial performance. Total net revenue grew by 19.9% year-over-year, reaching RMB 23.4 billion. This growth was driven by strong performance across its existing and new home transaction services, as well as the home renovation and rental businesses. Gross profit rose 22% year-over-year to RMB 6.5 billion, with a gross margin of 27.9%, up 0.5 percentage points from the same period last year. The company's focus on operational efficiency paid off, with operating margin increasing notably.

Home Transaction Services

Home transaction services showed impressive growth. Revenue from new home transactions grew by 55% quarter-over-quarter, despite a 20% year-over-year decline. This improvement was primarily due to the company's enhanced sales conversion capabilities and expanded partnerships with developers. The revenue from existing home transactions reached RMB 7.3 billion, marking a 14.3% year-over-year and 28.1% quarter-over-quarter increase. The company's monetization capability remained strong, with the contribution margin for new home transaction services recovering to 25%.

Expansion in Home Renovation and Rental Services

The home renovation and furnishing business maintained steady growth with contracted sales reaching RMB 4.2 billion, a 22.3% year-over-year increase. Revenue from this segment rose by 53.9% year-over-year, driven by improved delivery efficiency and higher gross margins. Meanwhile, the rental services business saw exponential growth, with revenue increasing by 167.1% year-over-year to RMB 3.2 billion. The number of rental units managed by the company more than doubled compared to the same period last year, demonstrating strong demand and effective management.

Operational Efficiency and Profitability

The company managed to keep its operating expenses under control despite robust revenue growth. General and administrative expenses remained stable at RMB 2.1 billion, while sales and marketing expenses increased to RMB 1.9 billion, up 14.1% year-over-year. Research and development expenses also saw a modest increase, reflecting the company's commitment to innovation. Overall, GAAP net income showed a substantial increase, rising by 46.2% year-over-year to RMB 1.9 billion. Non-GAAP net income amounted to RMB 2.7 billion, up 13.9% from the previous year.

Cash Flow and Shareholder Returns

The company generated robust operating cash flow, realizing a net operating cash inflow of RMB 4.8 billion for the quarter. This strong cash position allowed the company to allocate approximately RMB 100 million to share repurchases, part of a larger program that has seen the company repurchase around 7.5% of its total shares since September 2022. As of the end of Q2, the company's total cash liquidity stood at a healthy RMB 75.5 billion, excluding customer deposits. The company remains committed to increasing shareholder returns through active share buybacks.

Future Outlook and Strategic Initiatives

Looking ahead, the company plans to expand its share repurchase program from USD 2 billion to USD 3 billion, extending it until August 2025. Strategic initiatives include further scaling the agent and store network, enhancing middle-office digitalization, and improving service quality in the home renovation and rental segments. The company is also focusing on broadening its customer base through high-quality community outreach and leveraging technology-driven tools to boost efficiency.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc.'s Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I would now turn the call over to your host, Ms. Siting Li, IR Director of the company. Please go ahead, Siting.

[Siting Li, executive]

Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings, Inc. or Beike's second quarter 2024 earnings conference call. The company's financial and operating results were published in the press release earlier today, and are posted on our company's IR website, investors.ke.com.

On today's call, we have Mr. Stanley Peng, our co-Founder, Chairman and Chief Executive Officer; and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Peng will provide an overview of our strategies and business development, and Mr. Xu will provide additional details on the company's financial results.

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this call are in RMB.

Certain statistical and other information relating to the industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial resources. Neither the company nor any of its representatives have independently verified such data, which may involve a number of assumptions and limitations. And you are cautioned not to give undue ways to such information and as estimates.

For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only. And in case of any discrepancy, management statements in their original language will prevail.

With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.

[Yongdong Peng, executive]

Thank you, Siting. Hello, everyone. Thank you for joining Beike's second quarter and interim 2024 earnings conference call. In the second quarter, we continue to outpace the broader market. Since the beginning of the year, we have made strategic efforts to boost growth, foster our ecosystem and transformed our business into a technology-powered, one-stop residential services platform model. These efforts have paid off and we achieved high-quality performance across the board.

A set of supportive policies bolstered the overall market recovery in the second quarter. Notably, the existing home market, especially in fourth tier cities, rebounded sharply in May and June. Our home transaction business performed well within this favorable market environment with both our existing and new home transactions passing the broader market performance.

More specifically, in May, existing home transaction on Beike's platform saw positive GTV growth compared to the previous year and in June, growth surged by nearly 70% year-over-year. According to the estimate from data disclosed by the housing bureaus and housing associations of the 4 first-tier cities, the total number of online [ restorative ] transactions for existing homes grew by around 16% year-over-year in the second quarter of 2024.

For reference, while online restorative transactions on Beike's platform grew by 40% year-over-year, for new home transactions, the contraction rate on Beike's platform narrowed to 25% year-over-year in May from contract transaction value. And in June, GTV turned positive with the contract transaction value growing over 12% year-over-year. For the second quarter, GTV on CRIC's top 100 real estate companies declined by 35% year-over-year, while GTV contraction of Beike's platform narrowed to 20%. The improvement in the second quarter this year was partly due to the following efforts of the high base we saw in the first quarter. More importantly, our scientific management and proactive operational initiatives focused on improving our performance against internal bench markers underpinned our ability to outperform in a relatively stable market.

I'd like to share some color on our existing home business. In 2024, we have placed more emphasis on our operations in scaling up store and agents' networks, enriching community outreach and managing key housing projects to broaden our customer base and home listing coverage. Since the end of 2023, our platform has seen a net increase over 2,400 active stores or a 6% increase and a net increase of 40,000 active agents. As we expand our touch points, we are also putting more effort into high-quality [indiscernible] management, concentrating on quality home listings and exploring different ways to tap into new media-based opportunities for customer acquisition and conversion. All these initiatives have improved customer and home listing conversion rates.

We also boost cooperation efficiency with efforts such as region-based core governance communities and reinforced business conduct, governance by preventing private offline deals, improving closed-loop management on our platform. On the new home business front, we doubled-down on our efforts to increase number of cooperation projects and strengthening our sales conversion capabilities. In terms of expanding our cooperation with more new home projects, we established an end-to-end monitoring process for all projects and focused on managing key housing projects and developers to improve the quality of the new home build projects. To improve sales conversions, we overhauled our sales process this year.

Our approach to new home sales used to be a huge crowd strategy that focus more on properties than customers. This year, we are adopting a more precise approach driven by customer demand. In addition, we started monitoring and analyzing conversion rate from our cooperation with upstream and downstream value chain partners on a daily basis. We also delivered impressive results in our non-home transaction business of home renovation and furnishing and home rental services. Despite the challenging market, in the first half of the year, revenues from our home renovation and furnishing business and home rental services grew close to 60% and 177%, respectively, compared to a year ago and the gross margins continued to improve.

In fact, this year, we intentionally slowed down slowed our pace in the home renovation and furnishing business against the rapid growth in scale we achieved last year. To give you a bit of context, we're exploring new business within a big organization, building confidence in the business' viability and continuity is the first and most important challenge. That's why last year was all about accelerating our scale, where we are succeeding without compromising quality or reputation. This proves the business was viable, making a crucial first day.

However, if you run too fast, you risk sacrificing quality and losing customers' trust, how to balance scale and quality and customers' trust is the second challenge to developing new business. Having confirmed the business' viability with last year's strong performance, we slowed down this year to make sure we are growing in the right way by addressing the second critical challenge.

This year, we have been focused on 2 areas. First, we enhanced our capability to deliver comprehensive [indiscernible] full-service solutions. This includes improving our development of full service complete renovation products. Our management capabilities with service providers, supply chains and integrated delivery as well as building the corresponding system infrastructure.

Second, we iterated and promoted the home SaaS 2.5 system. We integrated this [indiscernible] full service capabilities we developed in Beijing into home SaaS 2.5, which can handle up to 5,000 simultaneously construction orders. We also integrated the BIM SSC middle office and integrated material fulfillment model. Our goal this year is to roll out these advanced capabilities nationwide through the Home SaaS 2.5 system. This year, we continue ramping up our ability to connect new suppliers on our platform. The number of stores for our housing transaction services is steadily increasing. And the number of service providers for our new initiatives is also growing rapidly. Without these new suppliers, our customers will face limited options. And our sourced capability could be constrained if plenty of supply also inevitably forces us to consider how best to manage it, ensuring their quality and improvements.

Our biggest challenge is to leverage certain rules to have the suppliers achieved better outcomes. We view this price on our platform and targets for transformation, not monetization. That's to say, once the suppliers, including service providers join our platform, we must enhance them. As a result, we are consistently investing in training for stores, operators and implementing robust operations for home listings, customer engagement and our ecosystem to enhance resources conversion efficiency.

Regarding our new businesses, we have made a significant effort to reform the incentive mechanism for service providers through rule-based order dispatch and service provider rankings. By fostering a transparent and benign competitive environment, we ensured resources allocated more efficiently to the most capable tenant. In the next area, customers will become more selective of our services, allowing how high-quality service providers to stand out and service variance will decrease.

Customers' needs will be more diverse and new, more segmented needs will emerge. These 2 points guide our efforts to upgrade our products and services and deepening our operations. This remains tremendous potential for group and efficiency improvements in both our relatively mature housing transaction services and our emerging business ventures.

One solution is to focus on community-based business by leveraging in-depth community knowledge and understanding residents' profiles and their needs for home purchase, rental and renovation. We can offer more targeted products and services. This approach related to change in customer acquisition channels, or additional structures and supply chains, allowing us to differentiate ourselves from the traditional residential industry. More importantly, these changes will help us build trust in our low frequency transaction industry. The key to community-based business is high service density. To that end, we launched more stores and organizational innovations in communities this year to increase supply.

For example, in Shanghai, we added a number of convenient service store stations affiliated with Lianjia stores and other cities are replicating this model. Additionally, we are integrating home renovation and rental services with Lianjia stores. We have deployed home renovation and expert engines in over 1,200 Lianjia stores and are showcasing renovation [ technicians ] and hosting in-store designers in pilot stores. Our coverage of existing home listing in Shanghai grew from 76% last year to 87% in areas that we operate in. And the revenues from our home renovation and carefree rental business in Shanghai Q2 grew by 63% and 140% year-over-year, respectively.

In Chengdu, we piloted our strategy focusing on key housing projects for our home renovation and furnishing business. Our operational team shifted back to intensive community engagement rather than disperse services, rebuilding our community-based services process and product logic. This pilot projects have demonstrated impressive improvements in conversion efficiency and productivity. In the second half of this year, the external macro environment will continue to pose many changes to our business. Faced with these challenges, our core goal has always been to build capabilities that will keep the organization constantly moving forward from one success to the next.

Over the past months, we have been fortunate to validate with minimal trial and error that our home renovation and furnishing model as well as our rental business model can drive growth in our organization. At the same time, our onboard business and showing further growth potential, through proactive market outreach, providing support for store owners and agents to achieve great success by integrating our new initiatives, we can drive even greater growth. In this context, our net step is to address issues related to the appropriate pace of each business and to balance it in scale, quality and efficiency. Thank you.

Next I would like to turn the call over to our CFO, Xu Tao, to review our second quarter 2024 financials.

[Tao Xu, executive]

Thank you, Stanley, and thank you, everyone, for joining us. Before we dive into our Q2 performance, I would like to briefly touch on some updates in the housing market. In the first half of the year, the central and local authorities implemented easing policy intensively. This included further relaxing purchase restriction, lowering down payment ratio and costing mortgage rates. The real estate financing condition mechanism will be established and put into practice at an accelerated pace.

The central bank launched relending tools to support local SOE in acquiring existing commercial homes facilitating the nationwide implementation of old [indiscernible] housing suite programs. In the first half of the year, the market showed a gradual recovery. Although market performance was muted due to the seasonality at the beginning of the year, all these supportive posties contributed to the market gradual improvement with a high base effect from the early last year receded.

In Q2, the in-home market performed well, especially in first-tier and some key second-tier cities where market activity notably improved. The new home market remained gradually subdued even as its year-over-year declined narrowed month over month in Q2. With the backdrop of an incremental rebound in market sentiment, we continue to uphold the market neutral view and focused on improving our performance by continuously deepening operations, further empowering service providers and to owners and promoting rapid growth of our new initiatives.

The combination of these endeavors led to our excellent financial and operating results in this Q2. For Q2, the total GTV reached RMB 839 billion, up 7.5% year-over-year. Net revenue was RMB 23.4 billion, representing a year-over-year increase of 19.9%. Gross margin improved by 12.5 percentage point year-over-year to 27.9%. GAAP net income reached RMB 1.9 billion, rising by 46.2% year-over-year. Non-GAAP net income grew by 13.9% year-over-year to RMB 2.69 billion. Both revenue and non-GAAP income exceeded the market consensus.

Moving to our home transaction services for Q2, as the overall market gradually recovered alongside our strong operational growth and the store network function this year, our existing and the new home business both demonstrated outstanding performance. Revenue from existing transaction reached RMB 7.3 billion, up 14.3% year-over-year and 28.1% quarter-over-quarter. GTV was RMB 570.7 billion, increasing 25% year-over-year and 25.9% quarter-over-quarter.

Our GTV and revenue growth rate were closely -- sequentially keeping our monetization capability gradually stable. Year-over-year GTV growth surpassed the revenue, primarily due to the adjustments in the commission rate of Beike Lianjia starting with the third quarter of 2023 attractive commission rates of existing homes.

The contribution margin from the existing transacted services reached 47.5%, climbing 1.9 percentage points year-over-year, and 3 percentage points quarter-over-quarter. The growth was mainly due to the strong leverage from the increased revenue, coupled with relatively stable fixed labor costs. In terms of the new home transacting services, the past market downturn, we significantly outperformed the market across multiple metrics. CRIC shows the sales from the top 100 revivers decreased by around 35% year-over-year in Q2, but grew by about 38% quarter-over-quarter. Notably, sales in June dropped by approximately 22% year-over-year, with year-over-year decline narrowly month by month.

In comparison, our new home transactions reached RMB 235.3 billion, grew by only 28.2% year-over-year and rose by 55% sequentially in Q2, benefiting from the higher penetration of the developers of China, different cooperation with developers and the increase of collaborative projects as well as systematic improvement in our operational and sales capabilities.

In particular, the amount of the contracted transaction volume from new home business increased 12% year-over-year in June and this exceptional performance set installed contrast to the industry. Revenue from the new home transaction service declined by 8.8% year-over-year to RMB 7.9 billion, while increasing 61.4% quarter-over-quarter. Year-over-year, the sequential revenue growth outpaced year-over-year GTV growth, whether again, demonstrating our strong and steady monetization capabilities in new home transactions.

The contribution margin for the new transaction services recovered to 25%, falling by 2.2 percentage point year-over-year, mainly due to the strategic increase in variable commission under our strategy this year to improve our ecosystem. New home contribution margins grew sequentially by 2.8 percentage points as we gained more leverage from the relatively stable fixed labor costs and higher revenue.

In Q2, the commission income percentage from SOE developers rose by 55%. And the proportion of commissioning advance project maintained at a relatively high level at 49%. Revenues from the home renovation and furnishing home rental services, emerging and offered services grew by 85.3% year-over-year in Q2, reaching 34.7% of total revenue, 12.2 percentage points from the same period in 2023.

Our home renovation and furnishing business maintained a steady growth. In Q2, contracted sales reached RMB 4.2 billion, up 22.3% year-over-year. Revenue reached RMB 4 billion, rising by 53.9% year-over-year. The revenue growth rate outpaced that of the competing sales, largely due to the improved delivery efficiency. The contribution market for the home renovation and furnishing business was 31.3%, up 1.7 percentage point year-over-year and 0.7 percentage points sequentially. This was mainly due to the improvements in the gross margins of our retail business.

The contracted sales of the furniture and home furnishing retail, which are outside of our home renovation package reached around RMB 1.2 billion in Q2, accounting for around 29% of total contracted sales improving by 3.5 percentage points from the same period of 2023. Our home rental services continue to grow at an accelerated pace.

In Q2, revenue reached RMB 3.2 billion, up 167.1% year-over-year, mainly due to the rapid growth in the number of rental units under management. By end of Q2, the number of units managed by our home rental services exceeded 310,000. Specifically, the non-growth rental units managed by carefree rents reached around 300,000 compared with around 120,000 in the same period last year. The contribution margin held steady at 5.8% from the previous quarter. In Q2, our net revenue from emerging and other services increased by 57.8% a year-over-year to RMB 874 million.

Next, let's move on our other costs and expenses in Q2. Our store costs remained stable year-over-year and quarter-over-quarter at RMB 681 million. Other costs increased by 18.6% year-over-year to RMB 511 million, primarily due to the higher taxes under the shirting and the basic maintenance cost for the rental services. Sequentially, it rose by 34.8% mainly due to the increase in taxes and the surcharge and the professional service fee.

Gross profit rose by 22% year-over-year to RMB 6.5 billion. Gross margin came in at 27.9%, up 0.5 percentage point year-over-year. The primary reason for the higher fees was from the higher proportion of the revenue and the increased contribution margin year-over-year in non-housing transaction services business. Our store costs are also relatively fixed, all of which gained us more leverage and partially offset the decline in our new home contribution market year-over-year.

Quarter-over-quarter, gross margin rose by 2.7 percentage points, largely driven by the sequential improvement in the new home construction market and an increase in its revenue share combined with overall revenue growth and stable store costs to further amplify the leverage effect.

In Q2, our GAAP operating expenses totaled RMB 4.5 billion, up 5.6% year-over-year and 9.5% sequentially. G&A expenses were relatively stable, both year-over-year and sequentially at RMB 2.1 billion. Sales and the marketing expenses grew by 14.1% year-over-year and 15.9% quarter-over-quarter to RMB 1.9 billion. As we invest in the rapid function of our home renovation and furnishing expenses, increasing associate sales and marketing expenses.

Our R&D expenses were RMB 505 million, rising by 6.3% year-over-year and 8% sequentially, mainly due to the increased R&D expenses in our home transaction business. In terms of the profitability, cash income from operations totaled RMB 2 billion in Q2, up 86.4% year-over-year. This follows the GAAP income from operations of RMB 11.9 million in the first quarter, which increased substantially quarter-over-quarter. GAAP operating margin was 8.6%, an increase of 3.1% and 8.6 percentage points from Q2 2023 and Q1 2024, respectively. Non-GAAP income from operations totaled RMB 2.8 billion, climbing 31% from the same period last year and 193% quarter-over-quarter. Non-GAAP operating margin reached 12%, up 1 and 6.2 percentage points from the Q2 2023 and Q1 2024, respectively.

The rise in operating margin was mainly due to our remarkable operating leverage, which lowered the operating expenses ratio. GAAP net income totaled RMB 1.9 billion in Q2, showing a 46.2% improvement year-over-year and 399.8% at quarter. Non-GAAP net income reached RMB 2.7 billion, up 13.9% year-over-year and 93.5% quarter-over-quarter.

Moving to our cash flow and the balance sheet, we realized a net operating cash inflow of RMB 4.8 billion in Q2, new home DSO 45 days in Q2, a testament to our effective risk management. On top of approximately about RMB 100 million allocated to share repurchase during Q2. Our total cash liquidity remained at a higher level of RMB 75.5 billion, which excludes customer deposits payables.

Overall, our Q2 results showcased our strong execution and ability to outperform the market with a stable market environment. Both our existing and the new home business significantly exceeded market expectations. Moreover, our platform's overall monetization capabilities have remained stable with notable improvements in the construction new homes. We also saw a significant a stable rebound in the contribution margin of our core business, moving part of the onetime effect of last year's high base line in the first quarter.

Additionally, our non-housing transaction services are repeated only. Both our home renovation and furniture and the rental business continued to achieve record highs in ski and revenue. We maintained our commitment to cost efficiency and the refined operation management.

Despite double-digit revenue growth, our GAAP operating expenses have remained nearly flat, both sequentially and year-over-year, leading to a substantial recovery in the profitability. With our robust cash reserve, we will continue to increase shareholder returns through active share buybacks, further optimizing capital allocation and enhancing capital operation efficiency, sharing the benefits of our development with investors.

As of today, we have repurchased around USD 480 million worth of shares, which accounts about 2.7% of the company's total share outstanding at the end of 2023. We have consistently delivered on our promise to reward shareholders. Since the launch of our share repurchase program in September 2022, we have repurchased around USD 1.39 billion worth of the shares as of today, which accounts for about 7.5% of the company's total share authorized before the program began.

Today, we are pleased to announce that our Board has approved the expansion of the existing share repurchase program. The monetization has been increased from USD 2 billion to USD 3 billion with a program now extends until August 31, 2025. Going forward, we will continue to reward our shareholders who have grown with us shared the value created at cost.

As our business becomes more diverse and expand in scale. We will continue to modify our fundamental capabilities while actively and efficiently investing in our infrastructure. Our financial strategy remains committed to a prudent approach and focus on investing area to generate the key business outputs and the long-term value. For home transaction services, as we found our store network, agent and store productivity will remain our key valuation metrics. We also amplified the operational and financial capability empowerment and the training for our platform partner to strengthen our middle to back office and business in finance.

Our new initiatives, we have built of middle to back-office vitalization ability across the board to further improve automation rates of our financial process as well as our data analysis and the processing capabilities. Simultaneously, we have set a higher requirement for contribution margins and other core financial indicators to advance the long-term studies and the strong development of our business.

Our risk threshold measures remain strongly in place. This ensures the seeds that we plant today will blossom so that we can share the rich fruits with our loyal shareholders.

This concludes my prepared remarks for today. Operator, we are now ready to take questions. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Harry Chen with Citigroup.

[HX Chen, analyst]

[Foreign Language] Congratulations for quite a solid second quarter results. So with lot of supportive property policies rolled out since second quarter, especially after May 17, what changes have occurred in the real estate market? Do new home and existing home market showed divergent performance? How sustainable are transactions after these policies? And what is your view on transaction outlook in the second half of this year?

[Yongdong Peng, executive]

Harry, let me answer your question. In Q2, the housing market saw a steady month-by-month improvement with an actual growth to in-home transaction volume since the new policy introduced on May 17. Notably, these new home prices also saw a narrowed decline in June. Also, the new home market has yet to strong non-seasonal improvement. The year-over-year sales decline in Q2 narrowed month by month.

The significant market juncture in Q1 due to the higher base and the seasonal factor has gradually faded. Market transactions continue to shift from new homes to existing homes. The proportion of national GTV from existing home transaction has increased from around 40% of total GTV last year to approximately 44% in the first half of this year. Now let me further elaborate. Further policy relaxation continue in the first half of the year, particularly after inventory reduction policy cycle began. Particularly, the May 17 policy package focused on reducing the housing inventory, reviving existing homes under relaxing mortgage conditions with high tier cities continuously relaxing purchase restrictions.

Regarding the existing home market, transaction volume in Q2 show notable recovery. Volumes on bigger platform in May and June increased month-by-month, outperforming month by month, outperforming the typical seasonal trend. The number of transactions in June reached the highest level of the same period since 2022 -- since 2020. This rebound was especially strong in the first-tier cities, stimulated by fewer purchase restrictions under relaxed mortgage conditions since the end of May.

In June, transaction volumes in Tier 1 cities on bigger platform were 46% higher than in April and increased 132% year-over-year, especially in Shanghai. Shanghai registered an increase of nearly 80% from April to June due to the extensive policy easing, reaching the highest peak we have seen since the early 2021. And for Tier 2 and Tier 3 cities, due to the prior rounds of policy relaxation, the impact and the market response to this latest round of policy was relatively limited. Regarding the transaction structure, the demand for the home upgrade continues leading the market, especially in the first-tier cities, where they make up 60% to 80% of transactions.

One notable feature of this market recovery is the increase in the proportion of home buying with the rising demand in key cities. Following housing price decline, the ratio of the housing prices to incomes has significantly improved. With lower down pre-payment ratio and the mortgage rate, housing [indiscernible] has substantially increased. And the relaxed purchase restrictions, in turn, attract more first-time buyers to the market. For example, in Shanghai, the proportion of non-local buyers increased from nearly 30% to nearly 40% in June, and the buyers who are single increased by 6 percentage points. This policy has significantly stimulated demand relief within the tough demographics.

On home prices, we are also seeing the positive sign despite the ongoing price decline in the single market. According to Beike Research Institute, the pace of month-over-month decline in national existing home prices slowed in June, narrowing to negative 1.2% from the negative 1.7% in May. Prices also stabilized in Tier 1 cities. Housing prices in Beijing and Shanghai increased by 0.4% and 1.2% month-over-month, respectively, in June, and we also slightly improved the second-tier cities. Sellers also become more rational about lowering prices. The proportion of the homeowners rushing to sell at significantly reduced prices decreased by 8% from the March to June. However, most of the potential buyers are still in a wait-and-see mood. Many are hoped to further price decline before entering the market. This market is a significant difference from the market response to the previous policy round in the second half of 2023.

Although the existing home market has become more active, there hasn't been a sharp drop in the housing prices. This suggests two things. Firstly, in high-tier cities, abundant demand coupled with improved affordability and the lowering buying cost is driving buyers out of their wait-and-see approach, and into the active participation, which in turn sustains local housing prices. Secondly, the effect of these policies has been validated to some extent, given the cumulative impact of the relaxed policies over the past two years to three years. New home market, the year-over-year decline in new home sales narrowed month-by-month in this Q2, but did not particularly improve overall. CRIC indicates that the top 100 developers sales grew by 42% year-over-year in the first half, narrowing to negative 22% in June.

Several factors are limiting the recovery of the new home market. Number one, in the past, existing homes had higher price of tax than the new homes. That is no longer the case. The price advantage of new homes diminished. Number two, pre-sold housing supply couldn't meet demand in immediate housing needs. Number three, the readily available supply of the larger and more luxury new homes did not align with what home buyers with the rising demand in the first-tier cities were looking for. Number four, the surprising flux of the nearly new homes, where it means the new home from a few years ago that are now entering to the market, they are meeting more of the current market demand, given their close match to the new homes, but with the advantage of the ready availability and the lower prices. With all of these factors at play, more positive forces are needed for the stabilization and the recovery of the new home market.

Regarding the outlook for the second half of the year, starting from July, the volume of existing home transactions declined due to the combined effect of the policy impact, [indiscernible] and seasonal summer factors. [indiscernible] of the policy lasted about two months. In first-tier cities, the transaction volume in July remained about 5% higher in April, while year-over-year, there was still significant growth. In the last week of July, the transaction volume was over 30% higher compared to the same period last year.

In July, the existing home price continued to drop, while the month-on-month decline in the first-tier cities narrowed compared to the period before the policy implementation. For the second half of the year, as the higher base effects diminished, the in-home market decided to remain stable. Transaction volumes in first-tier cities are likely stabilized after a spike-like recovery, providing some support for the prices as well.

However, expectations for the further price drop and the various cultural sentiments may still constrain the market recovery to some extent. Policy change will be a key variable in shaping market trends. On demand side, more easing of the purchase restriction and the optimization of the housing demand will help, while the supply side additional measures to support developers and reduce unit rates will help accelerate the market stabilization.

[Operator]

Your next question comes from Thomas Chong with Jefferies.

[Thomas Chong, analyst]

[Foreign Language] My question is about our new home business. Can management comment about why our new home is doing better than the industry? Can you maybe also comment about the alpha of new home and the trend about the monetization rate?

[Yongdong Peng, executive]

Thomas, since the first half of the year, our new home business continued to significantly outperform in the industry, supported by our robust operational and execution capability. Our housing consuming business continued to achieve our target of the outperforming the market and consistently generate alpha.

In Q2, our new home GTV reached RMB 235.3 billion, down 20% year-over-year, but was up 55% quarter-over-quarter. GTV of CRIC's top 100 road developers grew by 35% year-over-year in Q2. In June, our new home transaction volume increased by 12% year-over-year compared with the industry's 22% drop, notably outpacing the market.

In addition, our revenue in Q2 surpassed our GTV this is the case. First, that we have not compromised our monetization capability to gain market share. On the contrary, our stable monetization capability has been validated. Second, in the buyers' market by helping downstream agents with better incentive for new home sales has facilitated more efficiency flow-through in the current market.

The certainty of our business momentum stems primarily from our channel service coverage functions and enhanced sales through capabilities. In terms of the cooperation with the real estate companies, the relationship between broker channel and developer are setting the stage for new and immune mutual beneficial module. The total broker channels and developer has the more competitive relationship. However, as the new home market becomes a buyers' market, selling home has been more challenging and the customer needs have changed substantially.

The role of the sale channel in the industry transitioned from the simply mix deal to providing deep insight into the customer needs and collaborating with developers to address new home buyers pinpoints. Driving this trend, we have been advancing our reach and evaluating the depth and the breath of our partnership with top-tier developers. This year, we further expanded the coverage of the core state-owned developers and high-quality leading realty companies by submitting their needs with innovative new home services.

By the end of Q2, we doubled the number of developers that we have strategically collaboration to 25 from 13 in Q2 last year. The sales from our strategic partner developer accounted for 26% of our total new home GTV in June, 11 percentage points higher than the same period of last year. In June, the number of our cooperative new home product accounted for 62% of all new home projects across cities where we operate, excluding Beijing and Shanghai, compared with 49% in the same period last year.

Regarding our brokerage sell-through capabilities, previously, we rely on our labor-intensive approach. But this year in part by the technology tools, we strengthened the refined operations and promoted the conversion of a potential new home customer from the existing home market. We continually boosting the new home sales to in terms of the manpower, the number of the new home agents on our platform notably increased this year, responded of the comprehensive agents, such as more agents can engage in both new and existing home business in parallel.

For example, the number of the new home agents in Shanghai for Q2 was around 3x than what it was during the same period last year, incentivized by more competitive permission rates and the improved timely delivery of pre-served homes. Agents have increased the weariness to engage in new home sales. Technology-wise, we further iterated our potential customer product to help agents better identify high potential new homebuyers who are likely to make a new near term purchase while on covering the potential new homebuyers from the new home customers, accelerating new home customers' transaction efficiency.

In Q2, potential new home customers identified by this product accounted for around 5% of our overall new home sales, contributing about 70% of the new home sales. Additionally, through our innovative service solutions like the chain of the old home to new one, wire free repayments, wire free renovation and the home rental offering during the housing replacement will attract diverse client needs surrounding new home challenges, improving the efficiency of the new home sell through.

[Operator]

Your next question comes from Eddy Wang with Morgan Stanley.

[Eddy Wang, analyst]

[Foreign Language] My question is regarding the growth strategy of our home transaction service. What's the emphasis on Lianjia, respectively? And how is the feedback from the store level so far? And what's the innovative in the cities where our businesses are quite stable.

[Yongdong Peng, executive]

This year, our cost strategy for home construction business is promoting growth and building a harmonious ecosystem. In the first half of this year, we achieved notable results in scaling connected stores and exploring innovative models.

In terms of the scaling of our agent and store network, by end of Q2, the total number of active on non-Lianjia stores on our platform increased to 38,900. And the number of active non-Lianjia agent close to 380,000, versus 308,000 up by 6% and 2.8%, respectively compared to the end of 2023.

In the first half of this year, we added 48 new major brands. During this period, over 6,500 new stores were signed with our platform, averaging around 1,200 new spending per month with the 6 month retention rate of 93% was this new stores. For the newly connected stores, we provided fee discounts, installment plans and other support for those brands.

We also added their operations with experienced store owners and tailor-made integration plans. In terms of efficiencies, 3 months after setting up the productivity of agents into new stores connected since last September, reached over 80% of the productivity of the agent in the existing store on platform. Additionally, we help stores in some key cities enhanced efficiency through refined operations, such as property inventory checks, carefree home listing focusing, verification and reviewing. This were also aided by technology-driven tools, including our AI housing metric and the smart home listing mechanical system.

We're also seeing good returns from the investment in stores function. The new stores signed in Q4 last year have achieved a positive ROI as of June this year. Four new stores opened in Q1 this year. Their net revenue contribution in the first half of the year has already covered in the expenses. The continued scaling of our agent store network as well as diversifying our business from the housing transaction to one-stop residential services helped to place the higher and the more urgent demand on our platform ecosystem.

This year, we further extended the coverage of the regional core governance council to 74 cities by end of Q2. By working with like mandated service providers, we gathered valuable projections for iterating platform needs, granting more power to store owners and the agency in terms of the business and for the governance and forcing healthy industry competition.

With Lianjia as a testing of our platform, we have explored a series of innovation in the agent store model to facilitate our transformation to one store residential services, focusing on improving agent income in [indiscernible] the large store model. By the first half of the year, around 51% of the stores had more than 18 agents, an increase of 5.4 percentage points from last year.

Consequently, the attrition rate for the Lianjia agent decreased to under 4%. This size was also the result of Lianjia's strategic approach on the largest store model. Alongside the large store model, we are implementing the various stores formats to better serve demand in different community settings. Shanghai Lianjia, for instance, is broad different store types, specifically by leveraging low-cost convenience store that boost fast investment and target coverage. Shanghai Lianjia increased its service density.

At the end of Q2, our coverage rate of the home listing in the operational areas in Shanghai increased to 87% from 76% during the same period last year. Simultaneously, we established the flagship stores with more home-related elements, communicate rates was for one store residential services. In addition, we are exploring higher frequency community connections by brand crossover relying stores.

Among our ventures, we have launched store staff with agents who have a home renovation expertise and standards completed by display of the renovation process and technique. This approach promotes early customer acquisition for our home renovation business and further closer time with the community.

Regarding the channel development, in that segmented recruitment to 3 key areas, including college graduates, call center professionals and community experts. We offer a variety of programs to support newcomers through the initial growth period, helping to build a high-quality team of the service professionals.

Moving on to store management leadership, as a cornerstone of our 1.3 win strategy, Lianjia has also rolled out the leadership program for store operator designed to train well-run management talent, specializing in residential services and promote the long-term correct development for the service providers.

[Operator]

Your next question comes from Timothy Zhao with Goldman Sachs.

[Timothy Zhao, analyst]

And my question is on your non-home transaction business, including the home renovation and furnishing as well as the home rental business. I'm pretty glad to see that the contribution margin of the both businesses has expanded year-on-year in the second quarter. So may I ask on home renovation, what management's key operating focuses for this year? And what is the progress so far? And on the home rental business, could you share some color on how we should look ahead the economics of this business and what is the key drivers behind the profitability improvement?

[Yongdong Peng, executive]

Let me answer your first question regarding the home renovation. Our home renovation business reached over RMB 10 billion of the revenue last year, with standout performance in leading cities that validated our business capability and the model. This year, we are shifting our focus on building important infrastructure and capabilities. This includes upgrading our digitalized fundamental capability and the reinvesting process, based on our home sales system as well as optimizing our construction delivery and customized the furniture delivery capability.

The middle-office digitalization is the [ artery ] of our internal home renovation business. As a connect service providers and enable all home renovation activity to run smoothly under our continually refined and standardized process. Implementing middle-office digitalization through our home sales system, we have iterated the system to version 2.5 this year and are promoting it nationwide. So far, it has been successfully adopted in Beijing, Shanghai and Chengdu. Home SaaS powers 5 major sectors, customer sell system, central control system, construction delivery system and the supply chain system.

Compared to previous version, Home SaaS 2.5 really upgrades 2 modules, the big shared service center mid-office module and the integrated mature fulfillment module. Among the beam shared service center mid-office module automatically generate price codes for the renovation based on the standardized construction drawing from beam, thereby improving designer efficiency and reducing aerial rates. All design and construction data will be stored in the middle office system for future iteration.

In terms of the mature fulfillment integration, we have promoted the standardization of the product data and achieved online unified scheduling for various main material categories to increase the certainty of material deliveries. Regarding the improving our delivery capability, we shortened the delivery time lines and enact the proactive methods of the construction delivery.

This year, with the high order dispatch efficiency and streamlined construction process, we reduced the construction time lines. The combined construction period for basic construction and the main material reduced from around 111 days last year to around 100 days in this Q2. We also implemented proactive maintenance service nationwide. We now provide; the free maintenance and repair to customers at home at the fifth and second the month after the construction.

To address the common issue like a wall cracks, our goal is to detect and repair it early. In addition, our upsells team has grown from over 200 at the end of last year to more than 400 people by June this year. And we enhanced our capability in customer ordered furniture delivery. By taking relevant standards and enhancing training, we improved the success rate of onetime installation to around 80% in the first half of this year.

The home renovation process is complex as it involves a wild range of personnel and diverse products. Transforming the industry can now be accomplished through a single breakthrough. It requires continuous development of various capabilities across middle-office digitalization, project delivery and product development. In the long run, this endeavor will eventually bring up our high quality change.

Regarding the second question for our rental business, in Q2, revenue from the big rental service reached MB 3.19 billion, increasing by 167% year-over-year and 21% quarter-over-quarter. This growth came from the rapid increase in the number of home units that we manage and operate. Under our carefree rent module, we are managing over 300,000 units by end of Q2 compared with over 240,000, last quarter and over 120,000 at the same time last year. The number of units managed on our centralized long-term apartment has ranged over 14,000 at the end of Q2 compared to over 7,000 in the same period last year.

In terms of our carefree rents model, we improved our business unit economy. We provide service offerings to address tenants' major pain points such as home maintenance and the rental change to enhance our service quality while providing timely and high-quality response to tenants' issue. This led to a roughly 20% decline in customer complaints in June compared to the beginning of the year.

We meaningfully improved the leasing efficiency and the cut vacancy costs through the following efforts. Number one, on the product front, we have been consistently expanding the coverage of our new product model since last year, which increased mortgage rate. Its share increased about 6 percentage points in Q2 from Q1, reaching 26%. This effectively reduced the vacancy costs and enhanced our resilience against the rental price change. The preparation of this type of product module will continue to increase in the future.

Number two, the success rate of the first time rentals after the commencement of our property management contract increased from 82.2% in Q1 to 86.6% in Q2 and the amortized compensation cost per unit also decreased.

Number three, as we advance our carefree rent model, our operational focus has shift from the first time rentals to re-renting the same property, focusing on leasing renewal and presale lease, our business process is divided into the different stages with proactive intervention before the leasing is ending. This increase the turnover rate of the re-rented property from 3.1% in Q1 to 3.9% in Q2. And the time required to rent out a property for the second time decreased from 9.8 days at end of Q1 to 7.5 days at end of Q2, accelerating the rental efficiency while lowering the vacancy cost.

Number four, we also build up the rental capacity through the dedicated positions and improve the productivity. We have strengthened the dedicated rental agent, nurturing stable rental channels by leveraging top performing agent with strong commitment and capability in carefree rent. We also established a dedicated team of account managers for more tenant rental occupancy, achieving the greater efficiency in business lead in utilization, and targeted rental of the key listings while reducing the vacancy rates. The productivity of our account managers in facilitating renting out improved from an average of 8.8 units per month at end of Q1 to 10.2 units per month at the end of Q2.

In Q2, the proportion of the combined rental occupancy by dedicated rental agent and account manager go to 6%, an increase of 6 percentage points from Q1. Beijing also achieved a breakeven in the first half of the year by [indiscernible] accounting on the city level. By end of June, the number of units managed by the capital revenue in Beijing reached nearly 76,000 with a occupancy rate of 98.2%. Despite the scaling up the number of properties under management, which has led to a front leading adverse cost. We achieved break even in Beijing, this has substantially increased our confidence in the business.

[Operator]

We are now approaching the end of the conference call. I will now turn the call over to your speaker host today, Ms. Siting Li for closing remarks.

[Siting Li, executive]

Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike's Investor Relations team through the contact information provided on our website. This concludes this call and we look forward to speaking with you again next quarter. Thank you and goodbye.