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Hello, ladies and gentlemen. Thank you for standing by for KE Holdings, Inc. Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I would now like to turn the call over to your host today, Mr. Matthew Zhao, IR Director of the company. Please go ahead, Matthew.
Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings, Inc. or Beike's Second Quarter 2022 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, 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 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 our audit GAAP financial information as well as audited non-GAAP financial matters. Please refer to the company's press release, which contains a reconciliation of the [indiscernible] non-GAAP measures to comparable GAAP measures.
Lastly, unless otherwise stated, all figures mentioned during this conference call are in renminbi. With that, I will now turn the call over to our Chairman and CEO, Mr. Stanley Peng. Please go ahead, Stanley.
Thank you, Matthew. Hello, everyone. Thank you for joining Beike's Second Quarter 2022 Earnings Conference Call. In the second quarter, on a proactive leasing policies for the industry and effective pandemic controls, China's real estate transaction market saw a serious or positive changes, especially in the existing home market.
Meanwhile, we improved our platform's operational efficiency and stability in the scale of our stores and agents as well as [ overall ] productivity, but the internal and external environment we live in remains follow challenges. Macro uncertainty continue to increase, and our businesses are becoming more diverse and complex as we advance our one-body to win strategy.
Faced with such a complex internal and external environment to command and control our diversifying businesses, our organization needs to have deeply worked beliefs at the center. With that, we need to believe service providers, the real estate agents, renovation workers and foremen, designers, customer service representatives, rental housekeepers, they are our customers and our valuable assets. In terms of market transactions, our try and true practice of the years is to see any answers from industries frontline finding strengths from the day-to-day work of ordinary service providers. This is even more necessary today because we face market adjustments with greater than normal magnitude, and scale and the complexity of our organization have also reached a new level. First, going to the front line will help us to award the potential [indiscernible] companies as we grow in scale by our management and platform teams connecting resources as equals instead [ of apart ] while the front line remains at a distance.
We can bring everyone's heart together and establish a true understanding amongst one another. Second, we need to be on path to our frontline to be an industry in Internet platform recorded industry insights is only through our company's industry immersion that we can leverage the advantage of the platform, formulate useful rules and mechanisms and develop helpful functions and products.
To that end, close to half of 147 middle and senior management members on the Beike platform, myself included, spend 1 to 2 months working on the front line over the past few months as a junior agent, intra designers or rookie housekeeper.
Going back to the frontline has filled our organization with energy to fulfill our mission of admirable service, promoting us to again think about how to truly help our service providers improve their productivity, job security and enhance their sense of happiness at work. It has also urged us to streamline our process and get our organization lean. At the same time, by going to the front line, we are more convinced than ever post positioning to become industry's spokesperson. Our open are not the other high-quality providers in the industry, but all the low-quality service providers that hurts the industry's reputation and customer experiences.
We will make the industry better by accelerating the eliminating of this sub-par players. Going to the frontline, we have gained more confidence in our one body to win strategy. Our infrastructure foundation, the agents in store network in the communities is already completed.
Like a high-quality [indiscernible] is now open for more vehicles. This positioning us as a full leading service platform, providing a complex range of services including home purchase and sales, home rental, home renovations and other home-related services.
Moving on to our progress in the second quarter with our one body part existing and new home transaction services. At the end of the second quarter, the number of stores and active stores on Beike's platform was over 42,800 and 41,100, down 6% and 4% quarter-over-quarter, respectively.
At the same time, the number of agents and active agents on our platform was over 415,000 and 380,000, respectively, with a moderated quarter-over-quarter decline of 3% and 0.4%, respectively. The number of stores and agents in most cities stabilized in the second quarter with a churn rate for Lianjia agents dropping to just 1% to 3% in Beijing and Shanghai.
Non-Lianjia agile churn rate fell to only 5.6% in June, significantly better than the industry average of over 12%. In cities where existing home showed a stronger recovery trend on our platform such as Suzhou and [indiscernible] the number of agents even started to grow.
Total MAUs on Beike's platform reached 43 million, up 8% quarter-over-quarter. Our existing home transaction services continue to outpace the market. According to data from the Beike research institute, nationwide GTV of existing home sales dropped 45% year-over-year in the second quarter, whereas GTV of exiting home transaction on Beike's platform was RMB 393.5 billion, down 14% year-over-year, of which existing home sales declined 41%, outperforming the market.
Throughout the second quarter, the year-over-year decline of our existing home GTV continue to narrow from 41% in April to 17% in June. In 21 out of 32 Beike key cities existing home GTV exceeded the average 2021 level in June. The frequent release of easing policies in second and lower cities brought the pent-up [indiscernible] home upgrade demands back to the market and support the recovery of using home market in these cities.
We've started in our Q2 existing home transactions. GTV of non-Lianjia connected stores increased by as much as 33% quarter-over-quarter. In Beijing and Shanghai, effective pandemic controls firmly took the ropes in June, and we saw transactions recover rapidly and return to normal levels in the final weeks of the month.
Our firm investment in infrastructure and the products have supported a more stable network of stores and agents and higher operating efficiency, allowing us to substantially outpace the market in the recovery cycle.
On the infrastructure side, we constantly iterate our fear and competitive platform operation mechanism to motivate and retain high-quality service providers. In the second quarter, we optimized our business leads allocation mechanism to prevent cheating and enhance the sense of fairness. We also iterated our businesses lead model to make more accurate and operation more focused.
In terms of operations, we continue to refine our operations of existing home sales data center on home listings, improving home listing maintenance, listing, promotion and conversion efficiencies effectiveness. For Lianjia, this year, Lianjia has focused on improving operations to solidify the foundation for quality services and our national development.
In the second quarter, we rolled out several major initiatives. First, we reduced number of loss-making stores through more granulized management and by establishing single-store P&L models. As a result, the proportion of loss-making stores in Lianjia's pilot cities dropped by significant 80% from January. Secondly, we further improved Lianjia's agent productivity by establishing a 5A productivity management model to enhance overall management plus value and capabilities.
Apart from Beijing and Shanghai, in the other 27 cities Lianjia's agents versus connected stores agents, core agent productivity ratio expanded by more than 21% from the 2021 level.
Thirdly, Lianjia's agents actively participated in community pandemic prevention services and won recognition from community residents, which further supported the rapid recovery of our business of the pandemic resurgence past since July. There have been some corrections in the existing home market affected by the [ yearly ] hot temperatures in southern cities and the micro market fluctuations, but we are more convinced than ever that ever that existing home services will be the core of our future, and we will strategically redouble our focus on existing home services. Turning to new home transaction services.
According to data from the National Bureau of Statistics in the second quarter, the GTV of new residential home sales were down 36% nationwide year-over-year. It expanded from the first quarter and was the second largest single quarter decline since 1999.
The GTV [ of ] CRRC's top 100 real estate companies fell by 43.4% year-over-year. The new home market remains in a tough with weakness on both the supply and the demand side. And amidst the market headwinds, GTV for new home sales on our platform was RMB 222.7 billion, down 55% year-over-year and up 15.6% quarter-over-quarter.
Positive changes emerged at the end of May and a number of new home purchases offers on Beike's platform materially increased on a sequential basis in May and June, but the industry continues to face significant challenges in the short term, lagging improvements in financing and consumer demand with mounting pressure on sell-through.
As the industry undergoes rapid and powerful changes, high-quality developers have begun to establish new understandings, that is long-term advantages will be built through better and comprehensive utilization of qualified sales channels. Against this backdrop, first, in terms of new home listings, we have been rigorously carry out corporate-to-corporate collaboration with high-quality developers, increasing our share of sales by state and central-owned developers to 37% in the second quarter, 7 percentage point higher quarter-over-quarter.
This has improved the quality of our new home listings and made our sales easier and more risk-resistant. Second, with respect to channels, during the recent run of market corrections, agents placed more emphasis on operational safety, preferring to collaborate with the platform with high-quality listings, strict risk control and safe, fast receivable collections.
Channels with weak risk control, inadequate receivable collection management and single-minded pursuit of scale have been winded out by the market. This will result in high concentration for new home sales channels and our higher coverage of new home agent stores.
Third, operationally, we continue to promote and reinforce execution of the commissioning advanced model and other focused sales strategies. The commissioning advance model offer developers the opportunity to pay in advance projects with the commission in advance, consistently deliver higher sell-through efficiency, making it widely effected by the developers, agents and our receivable collection are further secure, setting in motion a positive cycle.
In the first half of the year, commissioning advance accounted for 22% of revenue from new home sales on our platform. Despite the short-term challenges, we expect a stable new home market with higher certainty in the long term after this long of correction. We will continue to strengthen our strategic focus and increase cooperation with high-quality stay and centrally owned developers, iterate our risk control protocols, data products and other value-added products and services, while further reducing costs and enhancing efficiency.
Moving on to the home renovation and furnishing business of our tool wins. July 6, this year marked the first anniversary of our official announcements of the Shengdu acquisition. Our financial were officially consolidated with Shengdu during the second quarter this year. Over the past year, Beike and Shengdu have carried out efficient all integrations of terms -- teams, organizational structure, operations and systems.
The process has progressed very smoothly, driving diverse synergies. For example, the supply chain advantage brought by Shengdu has helped raise up by 33% year-over-year and a referral customers from our core business contribute to over 25% of home renovation and contracted sales.
In the second quarter, our home renovation and furnishing business achieved robust growth against challenges of the pandemic. According to data from China Building Decoration Association, the VAS output value of leading home renovation and furnishing companies declined 21% year-over-year in the second quarter, while our home renovation and furnishing business generated pro forma revenue of RMB 1.37 billion, rising more than 10% year-over-year and 58% quarter-over-quarter, and our contracted sales reached close to RMB 1.7 billion. Meanwhile, we established organizational structure as well as ground rules and systems to support a better connection between core and emerging businesses. Real estate brokerage stores owners can receive commissions within 5 days of their referral traffic to home renovation and furnishing signed contract, fully incentivizing traffic referrals. In June, contracting sales from our business transaction traffic referrals accounted for over 25% of home renovation and furnishing contracted sales. Home renovation and furnishing is a low transaction frequency industry to improve the quality and the consumer experience with the industry role that interacts with the platform with high frequency, the service providers.
Only happiest service providers can bring quality services and happy customers. Service providers in the industry have many pain points, including unstable order dispatching, untimely settlement and that good service does not necessarily yield good income. We built transparent frameworks and customers that cover the service providers' qualification and admission, ranking, promotion and rewards all on the basis on service quality to address these pain points.
In terms of project delivery, we carry out refined process management to ensure on-time construction completion, establish systematic on online, offline, closed-loop management and promoted standardization of construction technology, project acceptance and other actions.
For consumers, we further advanced our service commitments of 10 permits for 10 [indiscernible]. Our construction process can be monitored online by customers in real-time and aftersales maintenance can be completed within 6 days. As a result, the absolute construction delivery period was shortened, in the customer satisfaction, NPS, of construction completion increased from 14% in January to 35% in June. We are exploring how to raise our top line potential and profitability beyond the range we are already seeing in the traditional home furnishing business. The nature of home renovation is our service business. It's about quality service with a high entry barrier, but carry relatively low profitability. Furniture and home furnishing, on the other hand, is our manufacturing business with good traffic acquisition, significant economics of scale can be shown.
We are trying to find out if it is possible to drive the sales of furniture and home furnishing, including customized furniture, soft furnishings, electrical appliances et cetera. Through home renovation, we are assessing this tracking furniture and home furnishing sales as a percentage of full service contracted sales.
We believe on a single-city basis and for our overall business units, 30% represents the initial validation milestone of this model's visibility and a 50% will represent the midterm milestone of its maturity. Today, we are rapidly growing our furniture and home furnishing sales as a percentage of full service control services raising from 11% in the first quarter to 16% in the second quarter, yet there is still tremendous upside potential.
Moving to our home rental services, creating social value as a society -- as a social responsibility enterprise, we achieved rapid high quality development in our home rental services in the second quarter, while attaching greater importance to cost control and sell-through efficiency.
Our aim is to achieve long-term operational sustainability of this business. As of the end of the second quarter, the number of contracted rental units manager or co-manager on our rental services 42,000, an increase of nearly 22,000 units from the end of the first quarter.
Among them, there were 31,000 units under care-free rents. We also took various measures to improve staff productivity and occupancy rate, aiming to balance scale and profitability through business model iterations, scientific management, systematic incentive mechanisms, we strive to sign up the high [indiscernible] units at the right price realized fast sell-through, all with enhanced services quality and productivity.
With these initiatives, the occupancy rate our Tier 3 reps continue to improve as the pandemic resurgence passed. In addition, we jointly launched the new use initiatives in June to provide fresh college graduates with favorable rental rates and commission reductions or exemptions to help them address the difficulty of renting houses at affordable prices. As of July 31, 2022, over 8,000 transactions were completed under the new use initiative, serving the graduates approximately RMB 12 million. Lastly, I'd like to go back and talk about our return to the frontline.
All business boiled down to be about people, especially the case for the housing-related services industry, which point to both consumers and service providers. For managers on the platform and myself, it's easier to connect and relate to consumers because everyone of us is a consumer at some point, but it's more difficult to identify with service providers by going back to the frontline.
Many of us [ have the ] power to emphasize with service providers relating to consumer convinced us that is the quest for joyful living will never change. On the same token, identifying with service providers enables us to understand and strengthening our conviction that, that to service providers, the need for long-term projects and a pride in their occupation remains a constant.
As the point goes, when the water ends, costs will rise, the business work of the future will never stop change, presenting us with one change after another, but as long as we connect with the costing elements while continuing to iterate ourselves, we will only get better and help the industry get better.
Thank you. Next, I would like to turn the call over to our CFO, Tao, to review our second quarter financials.
Thank you, Stanley. Thank you, everyone, for joining us today. Before discussing in more detail about our second quarter 2022 financial results, I would like to provide a brief update on the recent housing market. The past quarter, so most supportive policies rolled out to show up demand in the real estate market in China.
Such steps include the central government on site, lower mortgage rates guided by the Central Bank and the step up measures from lower to higher tier cities across countries. The property market has shown some sign of improvement with the existing housing market, especially responding quickly to the policy relaxation.
With the new home market was still clouded by that crisis among developers and weak homebuyer sentiment. Recently, the reemergence of COVID-19 outbreak and mortgage boycott started of unfinished new home projects have disrupted the recovery of China housing markets. However, we would like to address that those short-term hurdles will not impact Beike's business directly, as we believe the government will properly resolve the issue and ensure the delivery of the property projects. In addition, the uncertainty of the new home market in some cities could drive part of demand to the existing housing market.
While we have a stronger business presence and incomparable competitiveness well positioned to serve the shift in demand. Although [ the market ] was still on rocky way of recovery, we were able to take concrete measures to continuing building up our market presence and maximize our strength, including the collaboration network and the digitalization capability to enhance operating efficiency. Here, we would like to send a sincere gratitude to the employees who have been impacted by the company's business restructuring in Q2 for their dedication and the professionalism in the transit period.
Their contributions are extremely valuable to the company, and they will always be a source of inspiration of our future developments. In addition, we update our segment reporting from Q2, as a result of acquisition of Shengdu, which was closed in late April.
We consequently update our business structure results in all our business, which were existing home construction services, new home transaction services, home renovation and furniture and the emerging and other services and update the financial measures accordingly.
Turning to our financial details in Q2. Our net revenues decreased by 43% to RMB 13.8 billion in Q2 from RMB 24.2 billion, in the same period of 2021. However, it [ paced ] ahead of our guidance by over 30% and exceeded the Street consensus. The better-than-expected revenue were fueled by the factors.
Firstly, Beijing and Shanghai the mega market, and were off-line operation brought to halt due to the COVID introduced lockdowns in April and May. So transactions rebound rapidly in June after the pandemic eased, which was much quicker than what we expected previously.
Secondly, as in-home market in many higher-tier cities was able to stage a solid recovery supported by the policy easing, this was approved by a 33% quarter-over-quarter jump of GTV of in-home transaction served by connected agents on the content platform in Q2.
Thirdly, although new home market remains weak. We will strengthen the cooperation with high-quality developers and further enhance the sales ability, which enable us to seize opportunities as Beike rush to slow up the deteriorating sales performance.
However, the year-over-year revenue decrease was primarily attributable to the decline in total GTV of 47.6% to RMB 639.5 billion in Q2 for RMB 1,220.8 billion in the same period of 2021. In particular, our net revenue from this home transactions decreased by 42.5% to RMB 5.5 billion in Q2 compared to RMB 9.6 billion in the same period of 2021, primarily due to a 39.6% decrease in GTV of the in-home transaction to RMB 393.5 billion from RMB 652 billion in the same period of 2021.
Our net revenue from the new home transaction services decreased by 52% to RMB 6.7 billion in Q2 from RMB 13.9 billion in the same period of 2021, primarily due to a 55.3% decrease in GTV of new home transaction to RMB 222.7 billion in Q2 from RMB 498.3 billion in the same period of 2021.
Our net revenues from home renovation and furnishing were RMB 1.0 billion in Q2 compared to RMB 43 million in the same period opportunity to Q1, primarily because of the company completed acquisition of Shengdu Home Renovation Co. Ltd and direct business opportunities to it.
We began to consolidate its financial results during the second quarter of 2022. Our net revenues from emerging and other services decreased by 9.6% to RMB 557 million in Q2 from RMB 660 million in the same period of 2021, primarily attributable to the decrease of net revenue from financial services, which was partially offset by the increase of net revenue from the live rental property management services.
Cost of revenues decreased by 41.3% to RMB 11.1 billion in Q2 from RMB 18.8 billion in the same period of 2021. Gross profit was RMB 2.7 billion in Q2 compared to RMB 5.3 billion in the same period of 2021.
Gross margin was 19.7% in Q2 compared to 22.1% in the same period of 2021. The decrease in gross margin was mainly due to a relatively higher percentage of costs related to -- 2.1% in the same period of 2021.
The decrease in gross margin was mainly due to a relatively higher percentage of costs related to store of net revenue as a result of the decrease of net revenue in Q2 compared to the same period of 2021.
Operating expenses remained flat at RMB 4.2 billion in Q2 compared to the same period of 2021. Operational processes remained flat at RMB 4.2 billion in Q2 compared to the same period of 2021.
General and administrative expenses were RMB 2,250 million in Q2 compared to RMB 2,202 million in the same period of 2021, mainly due to the increase of the share-based compensation expenses and additional severance payments incurred in Q2, which was partially offset by the decrease of the recurring personnel cost and overhead, along with the decrease cost as well as the conference and the [ 12 ] expenses as a result of COVID-19 outbreaks in certain regions in Q2 compared to the same period of 2021.
Sales and marketing expenses were RMB 1,222 million in Q2 compared to RMB 1,241 million in the same period of 2021, mainly due to the decrease of the brand advertising and the promotional marketing expenses for the housing transaction services, which was partially offset by the sales and marketing expenses of Shengdu.
Research and development expenses for RMB 779 million in Q2, unchanged from RMB 775 million in the same period of 2021, mainly due to additional severance payments incurred in Q2, which was mainly offset by the decrease of recurring personnel costs and the share-based compensation as a result of the decreased headcount in research and development personnel in Q2 compared to the same period of 2021. Loss from operations was RMB 1,580 million in Q2 compared to income from operations of RMB 1,160 million in the same period of 2021. Operating margin was negative 11% in Q2 compared to 4.6% in the same period of 2021, primarily due to: one, a relatively lower gross profit margin; and two, the increase of the percentage of total recurring operating expenses of net revenue in Q2, primarily due to the decrease in net revenue; and three, additional service cost of RMB 438 million incurred in Q2 compared to the same period of 2021. Excluding non-GAAP items, our adjusted loss from operations was RMB 690 million in Q2 compared to adjusted income from operations of RMB 1,669 million in the same period of 2021. Adjusted operating margin was negative 5.0% in Q2 compared to 6.9% in the same period of 2021.
Adjusted EBITDA was negative RMB 104 million in Q2 compared to RMB 2,555 million in the same period of 2021. Net loss was RMB 1,866 million in Q2 compared to net income of RMB 1,160 million in the same period of 2021.
Excluding non-GAAP items, adjusted net loss was RMB 619 million in Q2 compared to adjusted net income of RMB 1,638 million in the same period of 2021. Net loss attributable to KE Holdings, Inc., ordinary shareholders was RMB 1,868 million in Q2 compared to net income attributable to KE Holdings, Inc., ordinary shareholders of RMB 1,112 million in the same period of 2021.
Adjusted net loss attributable to KE Holdings, Inc., ordinary shareholders was RMB 622 million in Q2 compared to adjusted net income attributable to KE Holdings, Inc., ordinary shareholders of RMB 1,635 million in the same period of 2021. Diluted net loss per ADS attributable to KE Holdings, Inc., ordinary shareholders was RMB 1.57 in Q2 compared to diluted net income ADS attributable to the KE Holdings, Inc., ordinary shareholders of RMB 0.93 in the same period of 2021. Adjusted diluted net loss or ADS attributable to KE Holdings, Inc's., ordinary shareholders was RMB 0.52 in Q2 compared to adjusted diluted net income or ADS attributable to KE Holdings, Inc's., ordinary shareholders of RMB 1.37 in the same period of 2021.
We maintain a strong cash position and sufficient liquidity in Q2. As of end of June, certain balance of our cash, cash equivalents, restricted cash and short-term investments amounted to RMB 50 billion or USD 7.5 billion. The balance of our long-term cash items mainly including the long-term investments, amounting to RMB 24 billion or USD 3.6 billion. In addition, we reported positive operating cash flow despite a challenging environment and the cash to income ratio of our new home services was 1.27 in Q2, demonstrating our strong current ratio last I will talk about the recent development regarding our operational and capital market initiatives as well as our near term focus on the corporate financials.
First of all, we did not sit idly by in the face of market headwinds. Nearly half of our senior level directors went to the frontline in the past months to work [indiscernible] as a agent home decoration or other roles. Holding believes that only if you become one of them, can you understand the [indiscernible]
By working side-by-side with our service providers and engaging day-to-day interactions with customers, we have a deeper understanding of how to try help service providers improve our productivity and the sense of the security as well as better satisfied customer demand. It's also encourages to fully embrace the challenges and create indispensable value for the industry.
Secondly, we took a series of the cost saving measures and focused on the efficiency in our daily operations to enhance the profitability. Part of these efforts will reflect in the improvement of the contribution margin of the new home connected services, which was at a 2-year high of 24% in Q2 despite a still sluggish new home market.
Moreover, as we carry out for the organization nation initiatives in Q2, we will gain a larger operating leverage for our housing transaction services against the changing market environment. We expect the operating expenses saving for the housing transaction services in the second half of this year to reach approximately 300 million to 400 million in each quarter, an absolute dollar amount of the operating expenses to be decreased to the same level of the second half of 2019, followed by the despite market recovery in the coming quarters.
We believe our possibility for the housing transaction services will gradually recover in the second half of this year. Thirdly, we will continue to make the investments in our 2 main businesses home renovation and furnishing services and the Beike rental services. Despite of the tough market environment, we will especially make the necessary and sufficient investments into home renovation and furnishing services, which enjoys a much larger total addressable compared to the housing transaction services.
We firmly believe this investment will yield long-term economic benefits and the trust we gained from our customer and the capability we accumulated in our core business will well position us to capture the rising demand in the furnishing sector. Fourthly, we obtained a general unconditional mandate from -- to repurchase the share from our shareholders at the Annual General Meeting held on August 12. We will execute the share repurchase program of up to USD 1 billion of our ADS over 12 months period.
This highlights the confidence we have in our long-term growth under the capability of our capital allocation, which prioritize the balance of the financial flexibility with an efficient capital structure. Turning to the guidance for the third quarter of 2022. We believe while the new home market is still growing in the dark, I think the housing market is already seeing the light at the end of the tunnel. It is expected to states large-scale recovery in the second half of this year. Based on bond considerations, combining the factors of the potential negative impact of the COVID-19 containment measures in certain regions and the base effect of the same period of 2021. We expect the total revenue to be between RMB 16.5 billion and RMB 17 billion in Q3, representing a decrease of approximately 6.1% to 8.8% from the same period 2021. This forecast constitutes the company's current and preliminary view on the business situation and the market conditions, which are starting to change.
Lastly, we'd like to highlight that the recovery of the property market is on horizon and the government policy has been on the supportive side with the focus on the meeting demand for the better housing. We will assist opportunities to further input efficiency through a range of cost management to boost the synergy, allocate the resources more efficient oriented under rig reversion and the strike a balance between the profitability and investment in the new business.
As we continue to reiterate, China's housing market is shifting from the new home sector to the new home market at an accelerated pace. With the home price stabilizing and the need for the better living of the Chinese people to increase. Home upgrade demand will serve as a prominent driver. Turbocharging will continue this function of the market and the result of high derived demand from range of services, including home renovation and furnishing and rental services. We believe our unique competency and the solid layout in those sectors will support to take the fast line and achieve the rapid growth in the long run. This is what we have been doing, not perfect, but we are on our way. That concludes our prepared remarks. We would like to now open the call to your questions. Operator, please go ahead.
[Operator Instructions] Our first question comes from Jiong Shao with Barclays.
I have a couple of questions, if I may. The first question is that you briefly mentioned about the policy relaxation in your prepared remarks. And I was just wondering, could you talk about the actual effect you are seeing from those policy relaxation? And any comments about the potential further relaxation for the second half of the year?
My second question is that you also highlighted in your prepared remarks about a very nice rebound of the existing home sales, particularly in Shanghai and Beijing. Could you just talk about your expectation for further recovery for the second half or what have you seen so far in the third quarter?
Thank you, Mr. Shao. Let me address your first one, guided by the supportive to set by the central government and the Central Bank liquidity support from low to higher tier cities, we actually saw the local government continue to step up the policy relaxation.
Since the beginning of this year, about 220 province at the city level or 230 have loosened the restricting nearly 600 times, exceeding the total of 400 tightening policies issued last year.
In particular, after [indiscernible] bureau meeting at the end of April, so frequency, which the local relaxation policy were introduced in the same core second-tier city in play accelerate reaching more than 110 times for each month from April to June. These policies are aimed at to ensuring the normal accretion of the real estate entities under the stability of the marquee transactions. There are mainly 4 type of eating measures. The first is the relaxation on the loan restriction and also includes the interest rate card.
The midstream first and second home purchase mortgage interest rate, we monitor in 103 cities dropped to 4.35% and 5.07% in July, respectively, taking the new low since the year of 2017.
Relaxations on loan restrictions also include the reduction of down-payment ratio, lower recognition standard for the second-hand home and also lower the restriction on the use of the housing provident funds, et cetera. Cities that issue such relaxation include the city of Suzhou, Nanjing, [indiscernible] And the second part is the relaxation of the home purchase restrictions including incurs for the city residents and the relaxed purchase restrictions for nonlocal householders is function of nonrestricted [indiscernible] and also the added purchase quota for the family members with the more than 1 child, and this was implemented in the city, such as Nanjing, Hangzhou and Changsha.
The third part is the subsidy incentive, including the talent settlement subsidies, housing purchase subsidies, relief of value-added tax and tax, et cetera. This kind of encouragement policy implemented in the city, such as [indiscernible] and Changsha.
And then the fourth type is promoting home upgrade. In the first half of 2022, 19 cities recommends the measures such as [indiscernible] revamp by using so-called housing coupon as a monetary compensation. These are easing policies with a stronger intensities, implementing in the cities such as Zhangdou and Nanjing.
We also set up the introduction of robust policies, multiple cities saw the subsequential recovery in some leading indicators is including the number of new property listings, new home customers and also the property tools as well as the agent confidence in that. Those cities also saw the substantial recovery in the transaction volume in June.
In the second half of 2022 we expanded to various cities to continue using the easing policies to support the steady market recovery. There is still substantial room for more positive easing. In last year, 2021 marked the year of the catalyst policy control in past 12 years.
Through the relaxation and support this year, this restriction are gradually being loosened. Nevertheless, at the end of June, most of the key second-tier cities will formalize relaxed compared to the most relaxed period in past 12 years. Under the basic principle of the housing [indiscernible] accretion, there is still a lot of potential for the further policy relaxation in different regions, both in terms of the diversity and the intensity of the easing policies.
And the central government has started to encourage the local government to actively introduce the policy to ensure the market stability. With the recent new home market emergence, the [indiscernible] meeting held at the end of July emphasize the full and effective utilization of our policy toolbox and city specific policy to support the rising housing demand and home upgrade demand.
Local governments are asked to fulfill their responsibility to ensure delivery of the home projects and protect the people's livelihood. So from our perspective, we believe that the 4 tier cities have a strong housing demand and solid fundamentals and that their local finance are less dependent on the real estate. The local property market can recover to a prior level even without the policy support. While for the supportive policies are expected to be introduced in the second tier cities and the lower-tier cities during the second half of the year to actively reduce risk and restore the market confidence and support the continued recovery of the market transaction. And regarding the second question, in the second quarter, many cities opened a policy toolbox and actively introduced the easing policies. With [indiscernible] home market being the first to benefit [indiscernible] market sentiment [indiscernible] generally speaking, also Beijing and Shanghai was severely affected by the pandemic, a large number of consumer who had taken [indiscernible] began to enter to the market, as evidenced by clear recovery signs in the transaction volume of the in-home market.
Overall, according to Beike Research Institute, in the second quarter, the GTV for China in-home sales market increased by 9.8% quarter-over-quarter and declined 45% year-over-year. A series of leading indicators monitored by a Beike are such as the [ housing ] index, number of new customers and the new listing and the price index suggests that the market's expectation rebounded in May and June from the bottom.
For easing home prices in June, there was a slight year-over-year increase in the first-tier cities, except Shenzhen. While the prices in the [indiscernible] second-tier cities have recovered to the level of the same time last year, but the prices in the third-tier and the fourth-tier cities continue to trend down.
In different type of cities, the key second-tier cities to recovery due to the less impact from the pandemic and the strong policy support, its in-home sales Beike platform, excluding Beijing, Shanghai, increased sequentially by 23% and 20% month-over-month in May and June, respectively.
In June, existing home sales volume, excluding Beijing and Shanghai, rebounded to [ 105% ] of the very transaction volume opportunity 2021 and the year-over-year decline narrowed down to only 2%. Transaction volume of the key tier-1 major cities such as Chengdu, Suzhou, Hangzhou and [indiscernible] surpassed the 2021 average level in June.
Cities such as Qingdao, Wuhan, [indiscernible], have also rebounded level similar to 2021 average. We expect that in the second half of the year, the key second-tier cities will quickly return to year-over-year growth, given the continued introduced -- the continued reduction of the easing policy and stabilizing market sentiment.
And the profits between Shanghai -- there were significant impact by COVID in April and May, but they delivered a strong market resilience in June with the transaction volume gradually picking up as the pandemic come under control.
Transactions volume of Beijing and Shanghai in the last week of June reaching to 2021 average level, this is a very good signal. We expect that in July, Beijing and Shanghai will benefit from the release of the pent-up demand caused by the pandemic disruption. And that's the monthly transaction volume is likely to return to year-over-year growth.
Starting from the fourth quarter, Beijing and Shanghai will enter to a healthy and normalized range in terms of transaction volume, together with restoring the confidence in the in-home market nationwide. For the whole country recovery pace, as we have repeatedly emphasized the China real estate market is transitioning from the new home driven to the in-home driven. The recent emergence of serious problem in the new home market will divert a substantial amount of the demand to the in-home market from the new home market. This is increasingly evident in a number of key second-tier cities. For example, [indiscernible], this in-home transaction accounted for 40% of the total transaction in the first half of this year compared to roughly 30% in 2020.
Same thing in [indiscernible] the proportion of in-home transactions increased to nearly 38% in the first half of 2022 from 28% in 2020. It is certain that the in-home market will continue to recover our greater scale in the second half of the year. We normally break down the entire cycle of the real estate transaction into 4 stage, the down cycle, including the stage of the price stable and volume down and price, volume was down. The upcycle includes the stage of price stable and volume increase under the price and volume [indiscernible] During the past half year, this in-home market has started to shift, halting at the bottom towards the recovery, while some strong second-tier cities have gradually entered into the recovery stage. It may take more than 6 months for the market to fully recover in this [indiscernible] Beike Research Institute data demonstrates the overall in-home sales market delivered a year-over-year growth in July. The aftermarket was a temporary impact, but on [indiscernible] temperature beyond the normal seasonalities, but this will announcing the recovery trajectory. We expect the home prices in some weaker second tier cities to stabilize into Q3, while the home prices in the third and lower-tier cities will be stabilized by the end of this year. Okay. Thank you.
Our next question comes from Harry Chen with Citi.
[Foreign Language] My first question is about mortgage boycott and the provision on receivables. Starting from July, there has been mortgage boycott for new homes with construction suspended in various cities in China, could the management share your views of the impact on company business? Besides, the management give us an update on collection and the provision of accounts receivables? My second question is to ask management's views of current new home market and its outlook after local governments finetune since second quarter of this year?
Glad to hear from you. Let me address your first question. Firstly, we want to continuously reiterate that it is bank and the developer risk instead of Beike for the payment boycott. So there is no direct impact on Beike.
Most of developers suffering from the mortgage revolt were identified by -- earlier the so-called the high-risk developers. So we have made sufficient bad debt provisions for those receivable concerns. Secondly, to start new home construction and the mortgage payment suspension are the events that happen under the extraordinary circumstances at the extraordinary times.
And we believe the Chinese government has a sufficient capability and the determination to resolve the issue. Recently, from our observation, local governments in several cities already implemented various initiatives to ensure the project delivery and as a result, multiple projects with a potential mortgage payment [ revolt ] risk resumed construction.
Under most circumstances, homebuyers for the mortgage payments only when the new home construction is stalled as [indiscernible] to get its construction to resume instead of refusing to pace outright. We also believe the mortgage payment suspension will promote the local government to help the industry is difficult as the fast pace and stabilize the consumer expectations which will all be instrumental for the industry to return to its normal operation.
Thirdly, if mortgage payment suspension were to surprise it may indeed negatively affect new home market sentiment in some cities and disrupt the new home market recovery in the second half of this year is very bad. However, as the in-home does not carry any rate of the stored construction that may fulfill the spill over demand from the new home market, which could benefit Beike, giving our wider presence in the in-home market and existing home higher profitability compared with the new home.
It's also offside to some extent the mortgage payment suspension netting effect of the new home market. For Beike's new home bad debt provision, we have made adequate bad debt provision for the new home receivables. At end of Q2, our cumulative balance of the bad-debt provision was RMB 2.21 billion covering 31% of the original value of the corresponding total receivables, especially for the 41 high-risk developers, including Sunac, we made a better provision at the operating mid of 83% of their historical unsecured receivables balance cumulatively amounted to RMB 1.32 billion.
We made a better provision of 49% of the receivable for a dozen developers and projects with a cumulative amount of RMB 160 million. As to the remaining developments with a low risk, we also made a better provision at a ratio of 10% to 20%.
I believe the current identified list of the property developers with a high bad debt provision already covered nearly all the high-risk developers in the industry with a little chance of the incurring subsequent large buyback provisions. While maintenance sufficient reserve against the buyback will also persistently reinforced our collection management of the receivables. In the second quarter, we incline a total of RMB 8.45 billion of new home sales receivables, 1.27x of the RMB 6.67 billion of our new home sales revenue in this quarter. The new home Beike also fell from last Q1 -- from this Q1 152 days in the fourth quarter to 108 days in this quarter. At the same time, we have maintained our selection criteria and risk control mechanism for collaboration with developers, iterate the developer rate evaluation model, optimize the settlement terms and conditions and increase the percentage of the project we developed for the commissioning of on, creating a favorable position for the subsequent receivable collections.
In addition, we incorporate with new home receivable quality into our manager's performance evaluation system at every level. We believe this initiative combined while consistently lower the life risk of our new home receivables.
Regarding your second question, I'd like to say, in the first half of this year, the national new home market was weak, both on the supply and the demand side. The GTV of Q2, new home sales from the National Bureau of Statistics recorded a year-over-year decline of 36%, while the GTV of CRRC's top 100 developer filled by 53.4%.
Developers investment confidence was weak in most cities. The industry was in a deep water faced with a sluggish consumer demand, the pandemic resurgence and the mortgage payment boycott. While there will some positive trends in the new home market since May, the number one is the market recovery profiled by multiple parties.
Starting in May, step-up local supportive policies, developer reaching for the half year performance and the catalyst of the [indiscernible] have a brought a series of the positive change to the market and the positive change verified by the front-end numbers.
The numbers of the offers to buy new home on Beike platform, achieve consecutive growth in May and June, up 50% and 27% month-over-month, respectively. Beike's new home on-site sells 50 key cities has also risen for the 2 consecutive months and has come out for the recent call range. And also active promotion by developers, the channel penetration rate in the second quarter increased significantly quarter-over-quarter.
The new home market recovery in June with a year-over-year decrease narrow down to 23% according to the National Bureau of Statistics. There are still uncertainties in the new home market in the second half of the year. The macro economy and the income expectation are under pressure. And the homes higher and the home rest divides a higher requirement for the living and also the geopolitical situation is facing uncertainties under their repeated pandemic resurgence mortgage payment being costs, developers by their default and uncertainties in the new home project delivery are affecting the restoration of the market confidence. In short-term overdraft of the new home demand in certain regions is also a constraint for the recovery of the new home market.
The industry is still facing a huge downward pressure and the recovery of the new home market will take time. We can monitor the subsequent promotion of developers and effort on the policy acquisition to establish the sort of the recovery trajectory and the sustainability going forward. There were short-term correction in the new home sales in July and August delivers mid-year promotion effect moderated from June. Meanwhile, the combined efforts of the euro high temperature in China, Southeast and Southwest is also a problem. This summer and also the mortgage payment suspension have also led to a notable decline in the new home market in July and August compared to June. Starting from September from our observation and expectations, we expect developers to again enter into an active promoting cycle under the pressure of the [ full year's ] target. Therefore, the market is more likely to enter to a weak recovery period. Thank you, Harry.
We have a question from Steven Tsai with Morgan Stanley.
[Foreign Language] My question is about the home renovation business. Could management share with us if there is any update on the business strategy or geographic expansion plan post the consolidation of Shengdu. And if there is any guidance on this business for the coming quarters? Also, is there any update on the timing of your launching the platform model for renovation, which you mentioned the 2025 or 2026 before?
Any milestone related to that, that you are looking at externally? Where are we now? And what's the biggest bottleneck you think?
[Foreign Language] Yes, this is Stanley. Let me quickly address your question. So firstly, as I mentioned during the prepared remarks, so during the second quarter, if you look at the leading industry companies in the home renovation and furnishing business has been declined 20 -- over 20% year-over-year. But whereas our home renovation and furnishing business actually has been increased significantly on a year-over-year basis.
So the run rate is one dimension as you mentioned. Another dimension we can describe for that business is we look at the referral rate from our core business, which is the housing transaction business. So when we look at the second quarter results, we actually see more than 25% of the referring and the conversion coming from the housing transaction business already in some of the specific cities such as Beijing, the conversion rate actually also has been reached to 80% or even higher. Some of it didn't do very well, right? But we do believe there is a huge space to continue to improve. So overall, we do believe the customers refer and conversion from the main business also another dimension to look at the progress for that target mix. So when we look at the future evolution for the home furnishing business, we actually look at it in the 4 business elements, all 3 major reasons. So firstly, coming from the policy side. So we recently noticed the fall of the Central Government department they actually have been joined, promote so-called high quality of the leaving plans into the national wide.
So that definitely will provide the additional policy drivers for the overall industry environment. Secondly, we look at the overall so-called industrial partnership as well as industrial correlation which is linked into the whole operation and furnishing business.
We look at it into -- from both of the upstream and downstream, correct? So from the downstream rather than the existing home, which has continued furnishing and improvement of the services of the demand. Rather than that, we also noticed for the new home, we also had the declaration and furnishing demand. So we do believe that will create additional market opportunities -- and from the upper stream, we also look at the correlation of the partnership from the home decoration business itself into the furniture and home furnishing sales business together. And we do believe by leveraging of the good quality of the home decoration business, definitely that will bring the additional potential to further boom of our furniture and home furnishing business going forward.
And thirdly, from the consumer's perspective, we all prefer more like a full coverage or the one-stop services, which is from the previously pure construction services into the full coverage of the services which just means we just cover from both of the construction part as well as the home furnishing and decoration business as a whole, right? So we don't believe by promoting those kind of full services -- it also will create additional opportunity for us.
So looking into the future development for the home decoration and furnishing business, we do believe there are 3 of the quantified of the elements as well as additional more excited and quantified of the elements to think about that part of business, right?
So in terms of the qualified of the elements, so firstly, we look at the scale, right, is until now, we don't see any of the company in the industry can surpass RMB 4 billion scale in the whole home decoration and furnishing industry in China, right?
So whether there could be 1 sole company which is annual revenue could surpass RMB 10 billion, we do believe that was 1 of the quantified elements. Secondly, as we look at, as I mentioned before, is the conversion rate from the core business into the home decoration and furnishing business.
We do believe in the future, these kind of customer referral and conversion rate will surpass 40% from our housing transaction business into the home decoration and furnishing business, and it will continue to grow. So that's what will be the second quantified of the elements. The second -- sorry, the third factor -- qualified factor is the correlation between of the simple the home decoration business with furniture and home furnishing sales. Starting from the beginning of this year, we look at the correlation, it's about 1.08, but it rightly actually has been increased to roughly 1.1, and we do believe the long -- mid- to long-term goal will be 1.5, right, which just means every $1 of the construction revenue, it will come with roughly like $0.5 of the home furniture and home furnishing of the sales of the revenues, right? So that is -- we do believe that of the qualified factors we can continue to monitor.
And beyond that, we do believe another qualified of the factor is -- as you mentioned, is a platform business model, right? Because if you look at our execution in the past 2 decades 2 of the [indiscernible] successful execution, we have been proven of the platform business model in our housing transaction business.
So we do believe for the housing -- for the home decoration and furnishing business, definitely also could gradually grow to the platform business model in the long-term goal, right? But in the next couple of years, especially in the next 2 to 3 years, we do believe we will focus our 1P business development because we do believe there has a lot of things we can continue to grow, including the teams, materiality, includes the delivery quality in terms of supply chains, in terms of the design, in terms of the online-offline correlation as well as the off-line sales market or other kind of offline events.
Definitely, for all those kinds of things, we can continue to grow and continue to show of the solid progress in the next 2 to 3 years. So we do believe we are not very [indiscernible] to run to the platform business model. So during that part of time, what we're trying to do is build up a more solid progress for our 1P business. Then 2 to 3 years later, we can graduate to develop into the platform business model. That is the answer to your question. Thank you.
Our next question comes from Timothy Zhao with Goldman Sachs.
I've got a very quick question on the cost savings. I think you mentioned in the second half, you expect around RMB 300 million to RMB 400 million cost per quarter. Could you further elaborate on the competence measures on how to cut costs and improve efficiency as well as what would be the future impact of these measures on your financial performance? That would be helpful.
Okay. Thank you, Timothy. As I mentioned in my prep remarks, we took a series of cost saving measures and focus on enhancing the efficiency and profitability in our delay operation in Q2. Meaningful progress was delivered was again reflecting our organizational strong execution and operational quality.
We adjusted our organizational structure and adjusted proportion of the junior and senior agents according to the different conditions in different cities and merge the regional teams. In addition, we prioritized the rising home business and higher profit-making new home business on a city level.
In terms of the cost control, will reform the shutdown the loss-making stores and drove the rent reduction for stores and office space. With these measures, our fixed costs and expenses as well as our city level even points continue to fall. In Q2, the fixed cost for the Lianjia decreased by more than 25% year-over-year. And we expect the operating expenses of the savings for the housing peter services in the second half of this year to reach up to approximately 300 million to 400 million in every quarter and up to dollar amount of the operating expenses to be decreased to the same level of the second half of 2019.
As we carry out further organization restructuring initiative in Q2, we have gained a larger operating leverage and the profitability for our housing transaction services against the challenged market environment. Our Shenzhen business, for example, turned to profit in June for the first time in past 50 months in face of the very weak market.
Another example is the part of effort will also reflect in the improvement of our contribution margin of new home business, which was at 2 years high of 24% of the contribution margin in Q2 despite a still sluggish new home market.
Followed by the expected market recovery in the coming quarters, we believe our profitability for the housing contained services will gradually recover in the second half of this year. Thank you.
We are now approaching the end of the conference call. I will now turn the call over to your host today, Mr. Matthew Zhao, for closing remarks.
Yes, thank you, operator. Thank you once again for joining us today. If you have further questions, please feel free to contact Investor Relations team through the contact quarter. Thank you, and goodbye. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you, and goodbye.
This concludes today's conference call. Thank you for participating. You may now disconnect.