Losses Widen for China's Biggest Real Estate Marketplace Company Beike in Q2 Despite Guidance Beat

The leading Chinese real estate brokerage and portal company KE Holdings (aka Beike) has announced its results for the three months ended June 30th 2022. Highlights of a quarter in which the company beat both street consensus and the upper end of its own guidance included:

• GTV (gross transaction volume) of $95.5 billion, down 48% year-on-year.
• Net revenues of $2.1 billion, down 43% year-on-year.
• Net loss widened to $279 million for the quarter.

KE Holdings is the largest specialist real estate portal operating company in the world by gross transaction volume and revenue. The firm also operates one of the leading brokerages in the country (Lianjia) and has been allocating increasing resources towards its furnishings business over the last 18 months.

Despite beating consensus for the quarter, the losses of the country's largest real estate brokerage and marketplace reflect the ongoing instability of the Chinese housing market. The Chinese government's Covid-zero policy is exacerbating a situation which has seen the country's largest developer, Evergrande almost default on its debts and millions of investors lose deposits on new build apartments.

We recently spoke to Chinese RE portal expert Brett Hartley-Wilson to find out more about the market. Watch the full interview below

As the market suffers, the number of agents and stores on Beike's books has dropped markedly over the last few quarters. The number of monthly active users did see a rebound to an average 43 million per month.

Despite the dismal current macro-economic environment, the company managed to use its cash reserves to cut costs as well as enact what it called "corporate-to-corporate cooperation with selected developers" to offer commission-in-advance programs. The strategy is essentially making developers more dependant on Beike as it becomes "both promoter and benefactor of the rising brokerage concentration for new home transactions".

Beike is forecasting a return to profitability in the second half of the year and there are already signs that the situation is easing according to CEO, Stanley Yongdong Peng:

"In the second quarter of 2022, promising changes began to take place in China’s real estate market. The existing home market, in particular, benefited from the easing on home purchase restrictions and effective pandemic prevention and control measures."

As China's largest brokerage and real estate marketplace with $1.8 in cash and equivalents on hand, Beike is well placed to weather the storm as it doubles down on its furnishings and virtual reality businesses.