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Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc.'s Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.
I will now turn the call over to your host, Mr. Matthew Zhao, IR Director of the company. Please go ahead, Matthew.
Good evening, and good morning, everyone. Welcome to KE Holdings Inc. or Beike's Second Quarter 2021 Conference Call. The company's financial and operating results were published in the press release earlier today and were posted on the company's IR website, www.investors.ke.com.
On today's call, we have Mr. Stanley Yongdong 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 developments, 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 today's 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 audited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB.
With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, sir.
Thank you, Matthew. Hello, everyone. Thank you for joining us on our conference call today regarding our performance in the second quarter of 2021.
This is our first earnings call since the passing of our visionary founder and permanent Chairman Emeritus, Mr. Zuo, who was also referred to as Lao Zuo throughout the industry, and that has been the most significant event that took place in the second quarter of Beike. We mourn his loss not only because he has been the founder who set a mission for our company but also because he was such an inspirational leader and a trailblazer who ushered us to explore the future and create values for the housing industry.
Lao Zuo has been an invaluable asset to Beike and Lianjia, and his contribution and influence exceeded way beyond our organization. With a clear focus on promoting industry progression, he took decisive actions as an industry practitioner, and he was a true leader who had urged us to reckon the more meaningful questions, like how we can change the industry and how we create value for consumers and the society. Lao Zuo has inspired us to self-improve, be visionary, enact positive changes, infuse value in everything we do and always do the right things despite the difficulty. In memory of Lao Zuo, we will continue to make dedicated efforts to fulfill our mission of providing Admirable Service, Joyful Living. We are deeply grateful for and motivated by the condolences and support we received following Lao Zuo's passing. We also appreciate Lao Zuo's family for their trust to the management by granting the irrevocable POA of the voting rights of their Class B ordinary shares to the company's Baihui Partnership, to which Mr. Yigang Shan and myself serve as the initial partners. Lao Zuo's family, together with the executive directors and core management members have also agreed to a 1-year voluntary share lockup of their holdings. After Lao Zuo's passing, we fully understand our goal, and we will rise to face the challenge and will continue to create value for our consumers, service providers, employees and shareholders.
Turning to our business operations, let's first look at -- take a look at the macro policy and market environment. In the past quarter, regulatory authorities expressed their views and opinions in various areas such as antitrust and data security, and issued a series of policies and guidance opinions in multiple industries. During this period, we have been honored to have multiple opportunities to communicate directly with the relevant government authorities and have gained their recognition and respect for our efforts to improve the industry through our interactions. At the same time, we have taken the opportunity to look internally and engage in self-reflection and introspection. As a result, we have further solidified our ongoing belief that our business model would not be feasible without the benefits from being in such a great country and in this great era. As we move forward, we will continue to reflect our thoughts on the 2 key questions, namely how we can change the industry and how we can take more social responsibilities.
Regarding the housing industry, recently many cities and regions have introduced various cooling measures, such as loan quotas, price caps, purchase restrictions and mortgage interest rate hikes, all in an effort to help stabilize housing price, land price and market expectations. These measures have begun to effectively shield the rapid expansion of the housing market in various cities. The pace of existing home sales growth in many cities started to slow down since May, signaling the beginning of a market correction cycle and a more stabilized growth period for the company.
The rapid development of China's economies over the past 30 years spurred fast growth in new and existing home sales, as well as demand for home renovation services with overlapping and interconnected waves of growth among segments. In a time with more balanced housing demand and supply and more stabilized market expectation for property price, we expect 3 major structural trends and opportunities, including the industry's focus on shift from houses to customers and from transactions to services and demand from consumers has moved from home purchases to high-quality living. In the housing industry, relative inefficiencies continue to persist with overall low user satisfaction and lingering problems such as lack of standardization, digitalization and Internet penetration. In light of this, we do not expect short-term market corrections to affect the continued long-term, firm demand of housing consumers' aspiration for more joyful living conditions.
Our journey over the past 20 years tells us that market corrections create opportunities for quality upgrade, strategic thinking and further development to improve competitive advantages in the future. In 2008, we introduced comprehensive scientific management for our organization; in 2011, we spearheaded authentic listings; in 2014, we initiated our nationwide expansion; and in 2017, we launched the platform strategy. Whenever the industry goes through a transformation phase, we ask ourselves if the industry would be the same with or without Beike and make decisions from a long-term perspective. Clearly, the industry would not be where it is today without these market corrections and the advancements that follow.
During that industry inflection, we are again looking inward, like what we have been doing over the past 20 years, to seek strength and explore opportunities to withstand market volatilities and create lasting future value. We will prove to the market that we are building a capable, sustainable and socially responsible enterprise that upholds an uplifting culture, and we aim to create value for consumers and our industry despite the relative market volatility. We believe we can generate more and more values in the housing domain. We hope our long-term commercial values that are built around home will continue to bring one-stop-shop, quality housing services for the 300 million plus families in China.
Next, let's look at our business progress in the second quarter and the first half of 2021. The number of stores on our platform increased to 52,868 in the second quarter, representing 25% year-over-year growth. Approximately 30% of new stores openings were from our current connected store owners. The number of stores with a trailing 12-month GTV of over RMB 50 million exceeded 19,500, accounting for 37% of the total stores, an increase of 10% quarter-over-quarter. In the first half 2021, the 2-year CAGR of GTV per store for Deyou stores and third-party connected stores was 20.3% and 15.1%, respectively.
As we shifted our focus in the second quarter to talent retention of the peak recruiting [ figure ] in fourth quarter, we grew the number of agents by 20% year-over-year to 548,000. The agent attrition rate in connected stores on the platform dropped to 8.1% in the first half of 2021 from 9.6% in the first half of 2018 (sic) [ 2019 ]. To enhance store management and agent retention, we helped 45% of connected stores to fulfill more than 13,000 store assistant positions. In the first half of 2021, we implemented agents -- or initiatives for agents on our platform, which have improved agent satisfaction and retention. In the second quarter, according to our survey, the number of agents that feel safe to work on the platform with others and the compliance to platform rules increased by 12% compared with that by the end of 2020. Average MAUs, including our MAUs on platform apps and WeChat mini-programs reached 52.1 million in the second quarter, up 33.5% from the same period last year as we continue to improve our brand recognition.
Turning to our existing home transaction services. According to Beike Research Institute, nationwide GTV of existing home transaction market in the first half of 2021 increased by 41% year-over-year, and it decreased by 8% compared to second half of 2020. In comparison, GTV of existing home transaction on Beike's platform rose to RMB 1.33 trillion in the first half of 2021, representing 70.1% growth year-over-year, while GTV of existing home transactions for connected stores increased by 89.6% year-over-year, reflecting our resilience during the early stage of the market downturn.
In a fast-growing market, agents tend to focus on closing deals. A market downturn, however, provides a better environment for us to refine management and enhance quality and efficiency. By the end of June 2021, we opened 287 Contract Service Centers in 30 major cities in China so that more customers can enjoy enhanced experience and transaction security during the signing process. We continued to promote our agent specialization strategy. As of June 30, 2021, our Agent Specialization Strategy has covered over 61% of stores in 21 out of the 30 core cities we operate in.
In the second quarter, transactions completed collaboratively by specialized agents on our platform accounted for 14.4% of total transactions in the stores that implement this strategy, a 7.7% increase from the first quarter, which indicated more frequent collaborations among our agents. Most notably, in Chengdu, 21.7% of transactions were completed collaboratively among specialized agents, and store efficiency increased by an average of 17% by the end of second quarter, comparing with stores not implementing specialization strategy.
We also continued to develop new products to empower the agents [ on ] our platform. For example, we are testing a new application named Best-in Pad (Bixing) which we piloted in Shanghai in the second quarter. Best-in Pad is a digital interactive tool to help agents interact with customers, presenting structured and visualized information at a glance on a large pad screen when they are communicating face-to-face. Best-in Pad significantly promoted standardized agent operations and enhanced offline information and services, prolonging overall customer interaction time by 29% and accelerating the process of building mutual trust between agents and customers. With these benefits, by the end of second quarter, over 30% of agents have adopted Best-in Pad as their main offline service tool in Shanghai.
With respect to new home transactions, according to National Bureau of Statistics, GTV of new home transaction market in the first half of 2021 increased by 39% year-over-year and was down 13% compared to the second half of 2020. In this context, GTV of new home transaction services reached RMB 841.7 billion in the first half of 2021, up 70.7% year-over-year, and GTV of connected stores increased by 85.4% (sic) [ 84.5% ] year-over-year.
During the past quarter, we continued to enrich online content for new homes. By the end of June, we have enriched online content for all new home projects on our platform with a minimum of 100 description fields completed for each new home listing. As part of our commitment to providing authentic and comprehensive housing information, we also added a module describing unfavorable factors of new home projects, facilitating more informed purchasing decision. We are also making steady progress with our New Home Business Conduct Improvement Plan. We also endeavored to offer Five Don'ts commitment to developers, including no customer journey hijacking, no customer snatching, no bribery, no collection of consumer fund, no fake advertising. As of June 30, 97.4% of our partner developers entered into Five Don'ts commitment agreement with us.
Moving to our emerging services. In early June (sic) [ July ] we were thrilled to announce the acquisition of Shengdu Home Renovation. We first tapped into the home renovation industry in 2019 through the launch of our home renovation brand, Beiwoo. As we continue to deepen our understanding of this industry, we have developed an even stronger belief in the vast growth potential of China's home renovation market.
The home renovation industry is of a considerable size, approximately RMB 7 trillion in total. However, there is scarcity of high-quality service providers and the lack of industry standardization and scientific management. As a result, it is difficult for the industry participants to effectively scale and earn profits, and they have to fight for survival in the industry, incapable of meeting consumers' increasing high demand for quality. As housing transactions shift from new homes to existing homes, the industry's customer base also changes from new homebuyers to existing homebuyers and residents in existing homes, adding more complexity and costs for conventional renovation companies to acquire customers.
Despite the industry backdrop, Shengdu is one of the very few high-quality companies in this industry. Founded in 2002 and headquartered in Hangzhou, Shengdu has a long operating track record and a large customer base in Eastern China along with an experienced management team and significant industry know-how. In addition, as one of the earlier practitioners of the full service model in the home renovation industry in China, Shengdu excels not only in marketing and products but also in supply chain management and execution. With strong management and robust internal control, Shengdu promotes the core value of taking good care of customers, which strongly resonates with ours.
As the existing home market become more active, consumers' demand for high-quality products and services increase and technological empowerment grows, we believe that the industry is now at a critical turning point. By seamlessly integrating the rich experience of Shengdu's team in the industry with our customer acquisition capabilities, self-developed standardized data infrastructure and our belief and credit to promote development through vertical penetration and horizontal expansion, we are looking forward to making a difference for consumers and service providers in home renovation industry.
At the same time, our in-house home renovation service, Beiwoo home renovations, which is being polished as a Minimum Viable Product, MVP, maintained robust growth. In Beijing, Beiwoo completed 834 home renovations in the second quarter, an increase of more than tenfold year-over-year.
R&D is also a top priority, and we continue to make key investments to upgrade our technology to further streamline our processes and enhance digitalization. For example, in the second quarter, we launched Home SaaS system version 1 that provides support through 5 modules: sales, BIM design, delivery, supply chain and middle office management, further enhancing the end-to-end standardization and digitalization of our home renovation services.
In summary, Beike is firmly upholding and supporting China's policy and local regulations opining "Housing is for living, not for speculation." We are also cooperating with regulatory authorities in dismantling false listings and discouraging speculative purchases, which helps stabilize land price, housing price and the market expectations and promotes the steady and healthy development of housing market. According to Beike Research Institute, with credit tightening and control measures such as price caps in various regions, overall home sales are expected to slow down further in the second half of 2021.
Our 20 years' operating history has proven that a market with balanced supply and demand provides the best foundation for our company's long-term development. With our mission of promoting Admirable Service, Joyful Living and our founding principle to pursue a better industry structure, we will take on more social responsibilities. We will empower agents and foster a friendly environment for communities, and we are committed to helping younger generation with affordable living through rental and other innovation solutions. We strive to fulfill more social responsibilities with a long-term goal to help industry progress, thereby creating long-term value for the broader communities.
Without noticing, we are approaching the first anniversary of Beike's U.S. IPO. I still remember the letter I wrote to the entire Beike family on the listing day last year. I mentioned in the letter that all institutions have their own ups and downs. The calmer an institution is during glorious moments, the stronger and more capable it will become when weathering difficult times. Looking back, the capital markets have been volatile in the past year and went through waves of fluctuations. As a witness of all these ups and downs, we're more firmly believing in the power of our mission: Admirable Services, Joyful Living. We will continue to always look inward to search for new areas of improvement, create values for the society as our output and stay strong and optimistic all the time.
Thank you all very much. With that, I would like to turn the call over to our CFO, Xu Tao, for a closer review on second quarter financials. Thank you.
Thank you, Stanley. Thank you, everyone, for joining us. I would like to provide a brief overview for the second quarter of 2021 financial results.
Before we discussed the financial results, I would like to reiterate what we mentioned in last Q4 and Q1 earnings call. Since our business operation had been seriously negatively impacted by COVID-19 outbreak in Q1 of last year, a meaningful portion of transactions had been shifted to Q2 of last year. We suggested that investors to look at and compare our financial performance as a whole for the first half of 2021 versus first half of 2020 to better reflect our business progress. Therefore, I will discuss both Q2 and the first half's financial performance here.
Our net revenue increased by 20% to RMB 24.2 billion in Q2 from RMB 20.1 billion in the same period of last year, exceeding both high end of our guidance and The Street consensus. The increase was driven by the total GTV growth of 22.2% to RMB 1.2 trillion in Q2 from RMB 1.0 trillion in the same period of last year. For the first half of 2021, our net revenues increased by 64.6% to RMB 44.9 billion from RMB 27.3 billion in the same period of last year, driven by total GTV growth of 72.3% to RMB 2.3 trillion from RMB 1.3 trillion in the same period of last year.
In particular, our net revenues from existing home transaction services increased by 4.9% to RMB 9.6 billion in Q2 from RMB 9.2 billion in the same period of last year, primarily attributable to a 11.7% increase in GTV of existing home transactions to RMB 652 billion in Q2 from RMB 583.5 billion in the same period of last year. For the first half of 2021, our net revenues from existing home transaction services increased by 57.9% to RMB 19.8 billion from RMB 12.6 billion in the same period of last year, driven by a 70.1% increase in GTV of existing home transactions to RMB 1.3 trillion from RMB 779.2 billion in the same period of last year.
Our net revenue from new home transaction services increased by 31.9% to RMB 13.9 billion in Q2 from RMB 10.5 billion in the same period of last year, primarily attributable to an increase of 32.3% in GTV of new home transaction to RMB 498.3 billion in Q2 from RMB 376.6 billion in the same period of last year. For the first half of 2021, our net revenues from new home transaction services increased by 70.4% to RMB 23.8 billion from RMB 14 billion in the same period of last year, driven by a 70.7% increase in GTV of new home transaction to RMB 841.7 billion from RMB 493.1 billion in the same period of last year.
Our net revenues from emerging and other services increased by 50.6% to RMB 0.7 billion in Q2 from RMB 0.4 billion in the same period of last year. The increase was primarily attributable to the increase of penetration level in the company's financial services around the housing transaction services and an increased number of home renovation units completed through the company's platform. For the first half of 2021, our net revenue from emerging and other services increased by 68.9% to RMB 1.2 billion from RMB 0.7 billion in the same period of last year.
Cost of revenues increased by 38.6% year-over-year to RMB 18.8 billion in Q2 from RMB 13.6 billion in the same period of last year.
Gross profit was RMB 5.3 billion in Q2 compared to RMB 6.6 billion in the same period of last year. Gross margin was 22.1% in Q2 compared to 32.5% in the same period of last year.
The decrease in gross margin was mainly because, one, market in Q2 of 2021 had more ordinary performance compared to the same period of last year as a significant portion of transactions, especially existing home transactions, shifted from Q1 to Q2 of last year, owing to COVID-19 pandemic, resulting in a higher base of gross margin in that period. Two, in Q2 of 2021, existing home sales market was affected by a series of market-cooling measures that led to a relatively lower contribution from existing home transaction revenue to total net revenue of the company, resulting in a lower total contribution margin compared to the same period of last year. Three, proportion of new home transactions completed by connected agents and other sales channels increased in Q2 compared to the same period of last year, resulting in a lower new home contribution margin in Q2.
For the first half of 2021, gross profit increased by 43.9% to RMB 10.1 billion from RMB 7.1 billion in the same period of last year.
Operating expenses were RMB 4.2 billion in Q2 compared to RMB 3.3 billion in the same period of last year. General and administrative expenses were RMB 2.2 billion in Q2 compared to RMB 2.0 billion in the same period of last year, mainly due to an increase in share-based compensation expenses. Sales and marketing expenses were RMB 1.2 billion in Q2, compared to RMB 788 million in the same period of last year, mainly due to the increase of the online and offline advertisement and branding campaigns as well as the increase of headcount in business development. Research and development expenses were RMB 775 million in Q2 compared to RMB 524 million in the same period of last year, mainly due to the increase of headcount in experienced R&D personnel and increased share-based compensation expenses. Total share-based compensation expenses were RMB 436.2 million in Q2 compared to none in the same period of last year.
Income from operations was RMB 1.1 billion in Q2 compared to RMB 3.3 billion in the same period of last year. Operating margin was 4.6% in Q2 compared to 16.3% in the same period of last year, primarily due to the relatively higher gross profit margin in the second quarter of last year, as we discussed gross profit, and the less operating expenses incurred in that period due to travel and offline event restrictions. For the first half of 2021, income from operation increased by 28.6% to RMB 2.1 billion from RMB 1.7 billion in the same period of last year. Excluding non-GAAP items, our adjusted income from operations was RMB 1.7 billion in Q2, compared to RMB 3.4 billion in the same period of last year. Adjusted operating margin was 6.9% in Q2, compared to 17.1% in the same period of last year. Adjusted EBITDA was RMB 2.6 billion in Q2, compared to RMB 3.8 billion in the same period of last year. For the first half of 2021, adjusted income from operations increased by 64.6% to RMB 3.2 billion from RMB 2.0 billion in the same period of last year.
Net income was RMB 1.1 billion in Q2, compared to RMB 2.8 billion in the same period of last year. Excluding non-GAAP items, our adjusted net income was RMB 1.6 billion in Q2 compared to RMB 3.0 billion in the same period of last year. For the first half of 2021, adjusted net income increased by 68.8% to RMB 3.1 billion from RMB 1.9 billion in the same period of last year. Net income attributable to KE Holdings Inc. ordinary shareholders increased by 5.6% to RMB 1.11 billion in Q2 from RMB 1.05 billion in the same period of last year. Adjusted net income attributable to KE Holdings Inc. was RMB 1.6 billion in Q2, compared to adjusted net income attributable to KE Holdings Inc. of RMB 2.9 billion in the same period of last year. For the first half of 2021, adjusted net income attributable to KE Holdings Inc. increased by 68.7% to RMB 3.1 billion from RMB 1.9 billion in the same period of last year. Diluted net income per ADS attributable to KE Holding Inc. ordinary shareholders was RMB 0.93 in Q2, compared to RMB 2.12 in the same period of last year. Adjusted diluted net income per ADS attributable to KE Holdings Inc.'s ordinary shareholders was RMB 1.37 in Q2, compared to RMB 2.23 in the same period of last year. As of June 30, 2021, the combined balance of our cash, cash equivalents, restricted cash and short-term investments amounted to RMB 59.2 billion or USD 9.2 billion. Additionally, as of June 30, 2021, the balance of our long-term cash items mainly included in long-term investments amounted to RMB 8.8 billion or USD 1.4 billion. During the second quarter, a slew of city-specific policies and severe market-cooling measures were rolled out in order to effectively stabilize the land price, home price and market expectations. We expect that the second half of this year could be one of the most stringent periods in past decades in terms of unprecedented conditions such as intensity policy launching, the variety of tools applied and the number of regulatory involved. From supply side, 3 red lines to developers, 2 red lines to financial institution, concentrated land auction in 22 cities and the reference price for home listings have impacted both new home and existing home transactions. From the demand side, tightening up mortgage practices and lengthening its approval period has significantly extended the transaction cycle, while the issuance of reference price and purchase restrictions has led to cooling down of consumer expectations. Those measures will promote stable and healthy development of real estate market in the long ruin while they will also bring the short-term uncertainties. As a result, we expect the real estate market will cool down moderately in the second half of this year.
In the face of this challenge, we firmly uphold those policies and measures and support government to crack down on housing speculation in certain overheated cities to stabilize the market. We believe that the longing for joyful living and better housing creates a firm demand from the customers. We have experienced several times of market ups and downs in past 2 decades. Nevertheless, the company always become better and stronger when we pass through those cycles. This is also the root cause why Beike and Lianjia could develop so well today.
According to Beike Research Institute, nationwide GTV of existing home sales market is expected to fall over 40% year-over-year in the third quarter. We will advance our agent specialization strategy in the existing home sales sector to ensure more business opportunities are accessible to our agents, incentivize and support store owners to introduce multiple benefits in an effort to smooth out market cycle disruptions to agents' income and retain talent in the industry. Meanwhile, nationwide GTV of new home transaction market is expected to dip 5% year-over-year in the third quarter, with the credit tightening and the purchase curbs intensifying. We will continue to invest in and develop professional new home agents, improving business conduct and enriching online content for new home sales sector. We believe with market expectation stabilizes after rounds of measures issued as well as the increasing sell-through demand from developers in the traditional peak season, opportunities are still sufficient in new sales -- new home sale sector for us in the second half of this year. Based on the above considerations, looking forward to the third quarter of 2021, we expect our net revenue to be between RMB 14.5 billion and RMB 15.5 billion, representing a decrease of approximately 24.6% to 29.4% from the same quarter of 2020. This forecast considers the potential impact of the recent real-estate-related policies and measures, and the company's current and preliminary view on the business situation and market condition, which is subject to change. Nevertheless, although our top line growth guidance has been slowing down mainly due external uncertainties, we are confident that our strong moat in the collaborative network we uphold in quality services and the improved efficiency will help us to continuously outperform the market. The foundation to pull through the downturn depends on the faith of the team, whether we believe we have the ability to turn the corner, whether we believe that sticking to our professionalism will eventually pay off, whether we believe the esprit de corps will drag us out of the darkest days. This kind of faith is what truly matters in difficult time. Meanwhile, based on the above-mentioned market changes and our decades of experience going through several market downturns as well as strong sense of mission to take on more social responsibilities, in the second half of this year, we will continue to put our efforts into the company's infrastructure and emerging businesses. We will increase our support to agents to incubate them, standing out in the industry and go through this difficult time together. We will also contribute more value to the society by speeding up our explorations in home renovation and furnishing business and pledging our efforts in rental housing services for young people and new city dwellers. Therefore, we reasonably foresee that we will commit more investment into our new business development in the second half of this year. In summary, although our performance cannot go against the market general momentum in the short term, we still strongly believe in what Lao Zuo mentioned in our prospectus. We focus on endogenous factors and minimize external influences. Marching through noises and market volatility, we believe it is our fundamental value rather than external circumstances that is the key to the continuing success of Beike. Compared to our near-term financial performance, we devote more efforts in developing and investing in our long-term capabilities even though it might take time to achieve the financial returns on these investments. In fact, the longer it takes and the more difficult it is, the more excited we become. That concludes our prepared remarks. We would like now to open the call to your questions. Operator, please go ahead.
[Operator Instructions] First question comes from the line of Liping Zhao of CICC.
[Foreign Language] My question is related to the commission rate. There were some rumors circling around market saying that there might be some limit on the agent commission rate. So how should we expect -- what's the view from the management team? And how should we expect the commission rate in coming quarters?
Thank you, Liping. This is Tao. Regarding the recent rumors, there have been lots of rumor about existing home sales commission rate recently, especially the WeChat Moments screenshot, which was widely circulated in many social network group 2 weeks ago. The rumor was sent by a junior person from a parasitic broker company, which is doing skipping order in Shanghai, which was a false news with ulterior motives. Meanwhile, we have been in close communication with a relevant authority and actively reporting related issue to them. The clear response from the Ministry of Housing and Urban-Rural Development is that so far, there is no such information in restricting housing transaction commission fee. I hope I makes this clear.
So -- and we -- also, we do think the real estate market is very different with K-12 education sectors with a different intention from the regulator. Being fair in public service is the key to education sector, while housing for living not for speculation is the key for the housing sectors. Therefore we do think that building up long-term mechanism in housing market to contain housing price from excessive hikes is the goal rather than containing housing transaction and related services. On one hand, the stabilization of the housing price aimed to suppress the wealth impact on people's livelihood and their consumptions. On the other hand, recent policy are all aimed at supporting long-term healthy growth of the population and the improvement of population structure. On the stable housing price and the long-term supply-demand balance, the market will enable a wider range of consumers to live better and continuously improve their living conditions, which is a solid foundation of sustainable and healthy growth of population. Therefore, we believe a market environment which is benefit for Beike's long-term development remains unchanged.
In summary, as I mentioned this point for several times. I want to make clear again, the commission rate reflects the service quality, transaction efficiency and service commitment. Charging unreasonable rates without quality and service commitments is a false proposition, like water without a source and a tree without roots. Going forward, Beike will continuously invest in our infrastructure and agents' professional training, offering more subsidy to support our connected store's development and agents' education in order to bring more value to the industry. We believe the overall commission rate on our platform will remain relatively stable. Hopes this clarifies.
Next question comes from the line of Piyush Mubayi from Goldman Sachs.
Your company has been through 20 years in the real estate market in China and been through multiple cycles. We'd be grateful if you could take us through some of the past cycles that you've been through and how long it has taken you to come out of those cycles from a negative growth rate to a positive growth rate. And if you could spell that through on a quarter-by-quarter basis, i.e., how long can the quarter be -- how many quarters can the negative growth rate be before you come out based on, let's say, the last 2 or 3 cycles, that would be very useful for us to better understand.
And while we completely understand that you're in sync with the government objective for pricing and price stability in the market, if you could just go through where the vulnerable points have been, where the volumes have declined very sharply, and where those points will start to stabilize, i.e., we start to see no more -- no further declines coming through. And if you could take us through where you are in Shenzhen in the last quarter or next quarter, that would be great.
Okay. Thank you, Piyush. Because this first half is a very booming season in 2021, so after the over booming first quarter and credit starts to tighten in the second quarter, and many regulatory policy were introduced in some overheated cities like Shenzhen, which has led to the start of a market downturn. For the second half of this year, we expect the overall market to continue cooling down. Currently, we reasonably foresee the property market will be under more pressure in Q3 compared to Q2 and last Q4.
In terms of credit supply, we expect the regulation to remain tight in the second half of this year, resulting in continuously rising mortgage rates, further extended loan approval and lending cycle. For existing home sales market, we expect will be largely flat in this Q3 by credit tightening and other regulations such as the reference price cut taking effect, causing overall existing home sales market GTV in the second half to slow down.
And in terms of the new home sales market, Q3 has a traditionally weak season coupled with the impact from loan restriction and the insufficient new home supply. We believe the new home sales might take a slowdown quarter-over-quarter in this Q3 but would recover in this Q4, supported by the seasonal strength.
We expect second half GTV for the new home sales market to dip by 10% year-over-year for the market. Developers will be more reliant on Beike channels in the second half of this year given the slowing down of existing home transaction, which add to difficulties in developers' customer acquisition. So for Beike and Lianjia, we have 20 years' history. We have undergone at least 7 times market cycles and up and downs. So I want to invite our Chairman of Board, Stanley, to give some color on this for further elaboration.
[Foreign Language]
[Interpreted] Yes. This is Stanley. Let me answer your question in terms of the cyclical trend and how we view those kind of cyclical impact to our business. Stanley?
[Foreign Language]
[Interpreted] Yes. When we IPO, we actually had been discussed a lot with the investors in terms of how we can view our business cycle, right? Whether we should look at that in a quarterly basis or on an annual basis or in the -- even like the 3 years basis. We truly believe that 3 years is pretty much like a cyclical which is more representative of our business cycle.
[Foreign Language]
[Interpreted] I think in terms of our business momentum, so a lot of the analysts and investors is not quite understand that. That is why when we're facing the first cycle after our IPO, so the people feel unsafe on that. So for me, I can explain that more details in terms of those kind of volatility, right?
So when we look at each of the -- no matter which city or which industry, they all have their own growth path, right? So we look at the materiality in more macro of the models for our business. For example, in Beijing City, there are roughly like 8 million to 9 million of the existing homes. And if we look at the turnover rate, it's around like 1%. It normally represent -- it's a low level in the industry, and 4% normally represented more like highly traded of the market. So that's actually also to be matched with stability within that kind of market.
For the normal conditions, normally, we think for Beijing, it's about 25,000 of -- the transaction volume per month will be more normalized of the level. If we look at a certain period, which has significantly surpassed those 25,000 volumes, the housing price actually will hack very quickly. And then followed by that, the transaction volume will -- also will be followed.
[Foreign Language]
[Interpreted] So in summary, seeing each of the cities, we have a so-called very normalized of the transaction volumes. And if the transaction volume significantly has been surpassed or lower than those kind of the market normal condition, the price will have -- will follow that to have significant changes. When we look at the 3-year cycle, normally, the first year and the second year, the transaction volume were relatively stable. But if there is a certain period, suddenly we see some of the transaction volume increase followed by the price increase, then the price will significantly increase compared with the first 2 of the years. Normally, it will be much higher than the 8% of the level, which is pretty much in line with the GDP growth, right?
So what we normally monitor is approaching to the third year of every cycle. The price will significantly increase, and then the transaction volume also will be impacted by that. So the authorities will be -- normally will have certain kind of measures came out with those kind of situation and in order to cooling off of the price hike. So when we look at the overall trend in the 3-year cycle, normally, it will be more like very stable of the overall transaction volume and with normalized price condition in the market.
[Foreign Language]
[Interpreted] So that is why in the past decades, we look at a similar kind of pattern in the year of 2008, 2011, 2014, 2017. And now it's 2021. So approaching to those kind of year-end will [ be fitting ] like cyclical of the challenge. But there are 2 of the characteristics I want to mention here as well, right? So firstly, the housing price normally will remain in -- relatively stable in a relatively long time horizon but will continue goes up more orderly based on those kind of demands. And secondly, the materiality (sic) [ maturity ] in those kind of cities or areas also will be changing followed by the materiality (sic) [ maturity ] of the market. For example, like maybe in the past of the cycle, 1% will be the stable level but now [ maintain ] to the 2% or even higher. In U.S. this year, we look at the 3.5% to 4% of the turnover rate. But it's -- I mean the price is still relatively stable. So that will be a very strong symbol for the materiality (sic) [ maturity ] of this kind of industry.
[Foreign Language]
[Interpreted] Yes. So I want to reiterate what we have been mentioning in the prepared remarks. So we think in the and we truly believe in the housing industry, the biggest key role for the -- from the government's perspective remains that housing is for living in, not for speculation, right? So the purpose behind that is definitely related to the stable price, but a stable price doesn't mean it will be not increasing. It more represents for the stable increasing, right? So it's not imply and the impact of other and bring other social matters.
So we have the example in the history. For example, like in Beijing, the last cycles bring the very serious matters. It's because of Beijing's housing price actually has been up 62% within 16 months' time. And for Shanghai, also the similar kind of trend is the housing price up to 65% within 18 months' times. So we had -- so after that, it's all bring the -- brought by the various [ theories ] of the management from the regulators. So that's also a very good testament, right? We truly believe for this industry, the biggest political and the biggest thing is how we can remain the whole industry, especially if the housing price stable. And if we not abide -- if we're not against this kind of trend, definitely, we believe we can take a benefit on that. And those kind of supply and demand, a balanced market, it also will be the best of the environment for Beike's further development.
[Foreign Language]
[Interpreted] So I can give you more examples in terms of how we can pass through all of those kind of the cycles and make ourselves stronger, right? So as I mentioned in my prepared remarks, like our journeys over the past 20 years tell us market corrections always create the opportunities. So if you look at our experience, normally in the second year, when we experience those kind of cycles, so we can create some of the new initiatives and doing the right thing even if it is difficult, right? For example, the cycle in 2008 and after that, 2009, we introduced a comprehensive scientific measurements, right? And after 2011 cycle, in the year 2012, we promoted authentic listings. And after 2014 cycle, in the year 2015, we initiated our national-wide exploration, all, et cetera, right?
So -- and every time when we go through the cycle, as I mentioned, so we always think about 2 things as a priority. So first thing is whether we already has been done, all the things we have been done and whether we are worth of what we truly believe ourselves, right, whether we are good enough to create value for the customers. And every time, our answer is we can do better, right? So that's the first thing we always consider.
And second thing is during those kind of cycles, that give us opportunity how we look at the long termism in a more deep nature, right, and make us more and more believe of those kind of long termism will bring long-term benefit back to the company. So in the year of 2021, when we're facing this cycle, we also has more thinking around the long termism. For example, right, the services behind of the home or the housing topic and the renovation services as well as how we can bring more social values when the company become stronger and bigger and how we can repay back to the local community. So that's all the thinking and the considerations that brought us for this cycle.
[Foreign Language]
[Interpreted] So that is why this year, when we look at the Shenzhen case, right, after of -- the Shenfangli has been cracked down as well as other things bring in [ irrational ] of the market for Shenzhen. And meanwhile, we also look at the survey from the overall new home market where this year's overall, the transaction volume has been up 30% and the average of price for the new homes in China also has been surplus RMB 10,000 per square of the level, right? So that all brings the -- enough of the reasons for the authorities continue to apply some of the measurement to make sure of the stable of the overall real estate market as well as a stable of the housing price. So again, when we talk about the housing price, it's not -- it doesn't mean, right, the house price will not go up. But behind that, we truly believe it's more like a moderate growth and with the moderate expectations. So all the things behind the whole philosophies will be quite important to the, I mean, I would say, the long term of the healthy condition for the industry.
And meanwhile, we also mentioned there are a lot of rumors, right? Whether this -- for example, like agents industry should be continued to exist or whether we will have the further pressures or, et cetera. But we truly believe those kind of rumors will be the totally nonsense, right? So as far as we can continue to provide the value to our customers as well as our -- the platform participants, so definitely, we can continue to bring the value to the communities, especially those kind of the supply and demand balanced market with very stable of the housing price, it's also the best of the environment for Beike's further development. So we will continue support of those kind of policy and continue to create value based on those kind of market environment. Thank you. So that's all the philosophies and my thinking behind your question.
Next question will come from Steven Tsai from Morgan Stanley.
[Foreign Language] My question is related to the liquidity issue and concerns that some of the top developers and some smaller ones are facing. So how should we size the potential impact on the account receivable risk for our new home sales business? Maybe how much bad debt provision you have recognized on your balance sheet so far? And if this issue persists and escalates, would that affect the new home commission rates of our new home distribution business going forward?
Okay. Thank you, Steven. For our collection, the status is very healthy. If we look at DSO of the company, in 2018, 2019 and 2020, our GTV of new home increased from CNY 281 billion to CNY 746 billion (sic) [ CNY 748 billion ] and to CNY 1.4 trillion, respectively, but our DSO were 117 days, 96 days and 103 days, respectively. So you will all see, even the total top line year-over-year, we doubled, but our DSO continuously dropped. Especially in this Q2, the GTV of the new home is almost CNY 500 billion, but our DSO further improved to 92 days.
The reason behind that is that the company has stringent revenue recognition criteria for new home sales. The company evaluates historical payment rate for developers thoroughly and recognize revenue for high-risk developer on cash basis under C-SOX accounting standard. That is we do a very prudent revenue recognition. The company also adopts diversified measures to ensure the payment collection safety, including adoption of the litigation preservation and other necessary measures, and we see continuous improvement in the accounts receivable collections.
In this year, we recently foresee some developers that may encounter some difficult time, and some of them will be identified as the high-risk developers. I will not mention name at this moment or platform. And I can share with one number, the total receivable from the so-called high-risk developer, accounts receivable reduced from CNY 1.5 billion to around CNY 800 million at the end of the second quarter. So everything continues to improve. And also, I want to share is in Beike, we are currently offer service for more than 7,000 projects and more than 240 developers across the country by end of Q2. And the concentration rate is still healthy, and the top 10 developers that accounts around our 25.5% of the transaction volume and from the top 100 developers, that accounted around 63%. So we have a very low degree of business concentration, and the [ credit ] risk for a single developer is relatively low.
And also, what I want to share with you is the question is also related to our view to overall new home sales market trend. And I think recent restriction hurdle on existing home transaction will ultimately impact the new home sales market. In order to improve the potential consumer conversation and cash collection, the developer, they are more and more allocated resources and inventory to the channel sales, such as Beike. So the higher demand of channel sales from developer will ultimately drive Beike's sales for our new home transaction service in the second quarter. And from Beike internally, we say cash is the king, we put tremendous efforts to -- for the project verification and ensure all of the collection will be collected in time.
The next question comes from Ashley Xu of Credit Suisse.
Two from me. The first is about some initiative from some local government to establish a website where they require the brokers to upload authentic listings to that website. It's still ongoing efforts, so early stage. But I just want to check on management's view on how such efforts could potentially impact the way Beike functions or [ awards ].
And second question is on regulation front, mainly both in antitrust and also data security. How is those -- how those regulations impact Beike?
Thank you. Yes, We do hear were some of news regarding the -- talking about Shenzhen. They have so-called short-lived property platform. First, I need to -- I want to clarify, the system, this regulator e-government information system, it's not a so-called platform to do the transaction business. The key goal for this upgrade of the e-government system is to obtain the first-hand information on property listing to effectively carry out regulation as a frontline watchtower to prevent the market from overheating. Actually, this is nothing new. In addition to Shenzhen, we noticed in other cities who are leading in urban services also have the same practice. And for example, in Hangzhou, we see they have the similar function and the feature on their systems. This is not the new things.
Regardless of which new system of new format emerged, our key focus will always be a better customer experience, transaction efficiency and whether the listing price is authentic. Our underlying operating logic is highly consistent with this so-called e-government system because it will further enforce authentic listing and facilitate the cooperation amongst agents. This is also in line with our ACN because our ACN has the culture of the transparency, collaboration and shared success. And we in past decades, we introduced and insisted in doing authentic listing.
While those companies rely on the fake listing, I'll not mention the company name here, and do the skipping order will face challenges. That's quite obvious who will benefit and the who will face challenges. We believe the launch of system will promote the healthy competition in the industry. So we are not worried about this, and we are fully uphold and support this.
Your second question is for antitrust. Okay. Regarding the antitrust, first, we would like to clarify again the news from Reuters related to Beike 2 months ago was a fake news. And currently, the company is not under any formal investigation related to antitrust issue, especially after we timely submitted our self-inspection report like other 33 platform companies in May.
Beike consistently operate within the bounds of laws, regulation and rules. We always prioritize the interest of users and spare no effort to achieve the win-win results through the cooperative mechanism. We insist and are committed to promoting the healthy development of the industry, devoted in solving inauthentic property listing and striving to be an outstanding company in full compliance with rules and regulations.
The good thing is through this round of frequent communication with government authority and state administration for market regulations. As a corporate citizen, we are even more determined to take social responsibility as a top priority. At the same time, the government also gained a better understanding of Beike's business model and our contribution we have made to help industry grow and iterate in the past 20 years.
In addition, our diligent attitude in handling the self-inspection and other related matters and the efforts and the contribution we made to industry progress were well recognized by the authority. For example, our investment brand of CNY 700 million in Shenzhen for brand of V-town offers affordable and quality rental services for the young generation living in a large and mid-cities, and they create more social value for the total -- for local communication (sic) [ communities ]. One of its project has been featured and reported by CCTV News, Xinwenlianbo, on 31st of July, which demonstrates highly recognition from the authority. Okay. I hope this clarifies your question.
We're now approaching the end of the conference call. I will now turn the call over to your speaker host today, Mr. Matthew Zhao, for closing remarks.
Thank you, operator. Thank you once again, everybody, 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 today's call, and we look forward to speaking with you again next quarter. Thank you, and goodbye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]