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Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc.'s Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Also, 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.
Thank you, operator. Good evening, and good morning, everyone. Welcome to KE Holdings Inc. or Beike's Third Quarter 2021 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, 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 strategy 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 apply to this call as we will make forward-looking statements. Please also note that Beike's earnings press release and this conference call includes discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Lastly, unless otherwise stated, all figures mentioned during this 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, sir.
Thank you, Matthew. Hello, everyone, and thank you for joining us today on our third quarter 2021 earnings conference call. Before I go into more details, let me first provide a big picture view of our industry. During the past quarter, the entire housing transactions and services industry, including ourselves, faced a series of challenges. As the new and existing home and land market is to be honest substantial corrections, transaction froze, marketing -- making a historical quarter. The industry collaterally made difficult and correct adjustments.
Not only is economic growth driven by high leverage, not sustainable, but it will also negatively affect people's lives and create systematic risks, result correction, creating the developer's business model that were based on high turnover, high leverage and high housing price. Our national policy goal of housing is for living not for speculation that it encourages both housing purchase and renting will become a castle in the sky. If the housing transactions and service industry blindly expand in scale without offering some professional services, it will unable to ensure service quality, nor adequately protect our consumer rights and efficient housing market will be impossible. When we talk about do the right things, even if it is difficult, we are referring to instance where there is an opportunity to undertake daunting tasks with a weak payoff in the short time, but will prove to generate great value in the long term. As a participant of an industry in need of reform and under the guidance of the Chinese government's policy to correct market instability and create more equitable housing circumstances, it's Beike's duty to shoulder the responsibilities for the great good rather than solely serving our business needs. We firmly believe China's housing industry is facing crucial development opportunities, a promising era for existing homes and better living is coming up upon us at an accelerated pace. With that backdrop in mind, let's talk about the industry and the overall performance of our company in more detail. A series of policies such as purchase restrictions, loan quota limits, sales restrictions, reference prices, financing limitation, payment restrictions and the recent alerts from several developers have also driven down market sentiments. The result has been a significant downtrend in the existing home transaction market in first-tier cities and more second-tier cities.
GTV of existing home sales market declined 41.6% year-over-year, while GTV of new home sales market declined 14.1% year-over-year in Q3. Due to a sharp market downturn, the ecosystem of the brokerage industry got worse quickly. The total number of brokerage agents on our platform shrunk and the brokerage stores faced severe challenges. In Q3, the number of stores on our platform with a trailing 12-month GTV exceeding the line of RMB 15 million declined 3.3% quarter-over-quarter, accounting for 33.7% of total stores. Our mission is to promote admirable services and joyful living in China. We have come to a point where our corporate culture, organization capabilities and our 2 decades of successful operations play a pivotal role as we move ahead. We have a strong team of seasoned senior manager taking charge at the divisions, provisional and city levels. These dedicated leaders average more than 10 years usual services at Beike, they see better industry developments at their personal responsibility. With this seasoned team and great determination, we are confident we can navigate the tough market cycle and come out even stronger. During the third quarter, we implemented a range of measures to ensure stable operations and sufficient income for high-quality store owners and agents which drive to inspire owners and agents to make the right choices, provide quality services in the face of challenges and deliver on their commitment to take care of customers against interferences. We believe the key is focus and collaboration. First, we have resolutely promoted our agent specialization strategy, increasing productivity through remaining focused. Second, we are diverting more resources to new home sales and rental services. Third, we further encourage cross-brand, cross-store collaboration and cooperate among existing and new home sales and rentals. We also promote joint efforts between new and seasoned agents as well as between functional teams and business teams. Together, we keep our fixed on the growth and carry on. During the third quarter, the number of connected stores on our platform increased 2% quarter-over-quarter to 53,946 and only 1.7% of stores on our platform closed due to the market correction. We also facilitate some store mergers to improve productivity, advise low-efficiency stores based on target diagnostics and dropped some noncorporate stores from our platform.
This also demonstrates that there is increasing stickiness among connected stores on our platform and a growing number of stores outside of our ACN have joined us for support during the down cycle. 29% of new stores that joined our AC network in Q3 were from external [indiscernible] stores compared with 22% in Q2. The number of agents on our platform was 515,000 at the end of Q3, 6% lower than the prior quarter end. The decline was a result of increasing agent attrition resulting from the market correction.
For the most part, this has been the industry normal but also due to our initiatives in some cities to improve overall agent quality. As we implemented various mitigating measures in Q3, the agent attrition rate in Beijing and Shanghai remained lower at 3.9%, better than the 4.7% we saw during the same period last year. Despite these broad challenges, our collaboration spirits continue to be the foundation of our business. In Q3, transactions on our platform completed through cross-store collaborations and the proportion of existing home listings contributed by [ not only ] Lianjia connected stores, both remained stable at 76% and 85.5%, respectively. Moving to our quarterly performance and the measures we have taken with each of our business lines. With respect to existing home transaction services, according to Beike Research Institute, nationwide GTV for existing home sales declined 41.6% year-over-year in Q3. GTV for our existing home transaction was RMB 378 billion with a year-over-year decrease of 34.3%.
Specifically, GTV for our existing home sales decreased by 36.8% year-over-year, demonstrating the relatively resilience of our business in the down cycle. Function allocation is the foundation of our ACN division. Our labor brings focus, focus bring professionalism and competitiveness and cooperate, bond this altogether.
To this end, we execute our Agent Specialization Strategy, overall setting 1,000 stores in Q3, covering over 300,000 agents. Transactions completed collaboratively by specialized agents on our platform accounted for 29.6% of total transactions in Q3, up from 14.4% in Q2. We are also making strides in digital empowerment. We launched the Xiaobei existing home sales training camp, which is an online standardize and intelligent system for vocational training, which shall be training camp simulate the interactions between agents and customers in VR and off-line property showrooms and provides performance evaluations, leveraging our AI capabilities. We can identify best practice in the process as well as each agent recognize for target training. In Q3, more than 125 agents took Xiaobei existing home sales training in more than 1.2 million interactive sessions. In the future, as we accumulate more data in existing home sales services, Xiaobei training camp can be used for broader vocational training fields such as new home sales and home renovation services. Turning to new home transactions. As we mentioned, the degree of correction in the new home market in Q3 exceeded our expectations. According to the National Bureau of Statistics, GTV or profit sales decreased by 14.1% year-over-year in Q3. Our new home sale GTV was RMB 410 billion, down 2.5% year-over-year, performing much better than the broad market.
The overall industry continued to trend downwards from July to September, leading to further build up or pressure on sell-through. On the other hand, brokerage penetration bottomed out in Q3 as developers became more reliant on brokerage channels to accelerate sales to preserve liquidity. This, in turn, benefited those new home sales channels that provide quality services, protect the interest of consumers and bolster our agent mobilization capabilities. We can see this by looking at the increase in the number of new home projects for sale on our platform, which rose from [ 36% ] from June to September. While our platform has been well recognized by developers, we continue adhering to high standards for project collaboration and performing end-to-end risk control to ensure timely and healthy tenant collections. In our new home business, we have prioritized timely payment collections over scale expansion or any other metrics. In our view, timely collection always trumps commission rates. We strictly implemented an end-to-end risk management and control system, which enables response measures with 24 hours after a risk volume is tripped. We do not expect to have significant risk in our new home business. We operate in a high independent fashion and have never relied on resources, endowments or relationships for our growth. Our confidence comes from the thousands of excellent stores and agents on our platform, and a strong customer recognition they have gained by performing high-quality services. We also forge ahead in digitalization and enrich online content for our new home business to provide consumer objective, mutual personalized online content that narrows information game.
We are encouraging our professional generated content, or OTC. We are building an open platform to enable those professionals to supply comprehensive commentaries, positive narrative and empower customers with more information in informed decision-making capabilities. This will further enhance the platform-generated content, such as our housing dictionary.
At the end of Q3, our housing dictionary has achieved 100% coverage of the target new home listings on the market. Notably, in Q3, we create China's biggest database describing unfavorable factors of new home projects. This lays the groundwork for Beike to bridge the information gap and provide truly reliable and useful new home content. We will now start our pursuit -- pursue of top-quality services. During market corrections, we believe it is more important than ever to emphasize the governance of new home business conducts. At the end of Q3, our [ Five Don'ts ] commitment to developers have covered all developers in 66 cities, 11,191 new home projects in total. By mid of October, we identified a total of 47 misconducts and provided nearly RMB 2 million in compensation to developers, fulfilling our commitments to them. Moving to emerging services. In Q3, we steadily progressed home renovation business, including self-operated Beiwoo and Chengdu, which we are in the process of acquisition. Beiwoo completed the renovation of 1,127 home renovation units in Q3, up 35% quarter-over-quarter, while the contracted sales of Chengdu also increased more than 35% year-over-year from the end of Q3. Regarding its operations, Beiwoo achieve breakthroughs in empowering both services providers and customers in Q3. For service providers, Craftsman Academy, the industry-first full services vocational training base, opened in September. It aims to cultivate renovation professionals across the industry chain, nurturing designers, foremen, workers and more. The focus is on general and professional competencies and leadership.
In September, 394 foremen took part in the training. Long plagued by the shortage of high-quality service providers, industry infrastructure such as Craftsman Academy is designed to upgrade renovation service standards and have industry practitioners achieve personal growth. Meanwhile, we upgraded our home system to manage and empower both foremen and workers.
This upgrade, although allows even the construction process to be standardized, modularized, assessed, distributed and managed to the finance granularity. Labor and materials are centrally deployed by the platform with an accurate and controllable budgeting process. For customers, we will launch a 10 heart-to-heart service commitment in September to address the renovation industry key pain points for customers. Our pledge include double compensation for malicious increase beyond the scope of a contract, proper refund for under-the-table charges, triple compensation for using fake materials, compensation for delays and 6 others covering alerts -- covering areas of budgeting materials, construction time lines and services. In summary, in this round of corrections, we are accelerating our thinking on the additional value we can create for society and social responsibility we should take. The answer has become increasingly clear. In China, people's yearn for a better life is reflecting in their desire to live and work with joy. To facilitate joyful living, we hope to provide a rich variety of high-quality and affordable housing services and products for those who... [Technical Difficulty]
Including the fresh college graduates, low-income groups, new urban citizens. Therefore, we are devoting more talent and resources to innovations and our rental services and generation our other residential communities to facilitate work that is rewarding and fulfilling.
With the government's support of vocational education, we have established multiple layer training and education system for housing services providers. This includes the Original Force Academy for brokerage brand owners Huaqiao Academy for store owners and Beike Brokerage Academy for agents as well as Craftsman Academy for renovation services providers. As we mentioned earlier, our goal is to have more home related service providers with a path for long-term career development and cultivate more high-quality professionals and technical experts for the industry. All in all, despite the short-term impact on our business and the industry at large during the market downturn, the overall trend in the housing market remains healthy. Lastly, regulatory authorities have responded multiple times to market concerns. Consumers' reasonable funding needs are gradually being met. Meanwhile, by the accelerated introduction of a property tax pilot program, we believe that a long-term regulatory mechanism can be quickly formed.
In turn, we see promoting the emergence of a new age of existing homes and quality services sooner than we expected. The real estate sector in major developed countries accounts for approximately 10% to 12% of a country's GDP. Housing investment market makes up only about 5%, and the rest comprise a broader array of housing services.
In contrast, the real estate sector contributes to merely 7% of China's GDP, with housing investment makes up a majority of China's real estate sector. This indicates massive potential for our domestic housing service industry. If the past 5 years have been the golden age of real estate development, then the next 5 years will be the age of joyful living, characterized by quality housing services.
Short-term fluctuation imposed on long-term secular trends are simple noise. We follow our inner compass and will persist to become the leading comprehensive home services providers for the 300 million families in China. With that, I would like to turn the call over to our CFO, Tao Xu, for a closer review of our third quarter financials. Thank you.
Thank you, Stanley. Thank you, everyone, for joining us. I would like to provide a brief overview for our third quarter of 2021 financial results.
As we guided in the second quarter's call, in the past several months, we saw a big sharp drop of the overall property market, including land auction, new home market and the existing home market amid unprecedented crackdown on speculation with an array of cooling measures from credit tightening to reference home price being rolled out, just had adversely impact our operational and financial results in Q3. So we are experiencing credit and sharp market downturn. We still want to emphasize our 3 fundamental beliefs towards this industry. First, housing is one of the largest and the most complex industry in China and a prime candidate for the digital disruption. Second, agents are and will continue to be indispensable to transaction and can be empowered to thrive. The third, professional cost services build customer trust and transcends market cycles.
We are confident that our continuous effort in maintaining the best cost service by providing -- by supporting our agents and further upgrading the infrastructure in housing transaction and services will help us go through the cycles, and further improve our service quality, efficiency and business scale. We maintain our long-term view in pursuing our mission to transform the housing transactions and the services industry in China by leveraging our people, data insights, technology and platform. Turning to our financial details in Q3. Our net revenue was RMB 18.1 billion compared to RMB 28.5 billion in the same period of last year, exceeding the both the high end of our guidance and the Street consensus. The year-over-year decrease was primarily attributable to the decline in total GTV of 28.9% to RMB 830.7 billion in Q3 from RMB 1.05 trillion in the same period of 2020.
In particular, our net revenue from existing home transaction services were RMB 6.1 billion in Q3 compared to RMB 8.8 billion in the same period of 2020, primarily due to a 34.3% decrease in GTV of existing home transaction to RMB 378.2 billion in Q3 from RMB 576.1 billion in the same period of 2020, led by a slowdown of existing home market, which was affected by serious market cooling measures, especially loan quotas will be mixed in Q3. Our net revenue from new home transaction services increased by 2.5% to RMB 11.3 billion in Q3 from RMB 11.1 billion in the same period of 2020, primarily attributable to a moderate increase of new home transaction commission rate, while the GTV of new home transaction was RMB 410.1 billion in Q3 compared to RMB 420.7 billion in the same period of last year. Our net revenue from emerging and other services was RMB 610 million in Q3 from RMB 625 million in the same period of 2020, primarily due to a decrease of net revenue for financial services around the existing home transaction services, which was partially offset by 29.4% increase of net revenue from the renovation services. Cost of revenues was RMB 15.3 billion compared to RMB 16.2 billion in the same period of 2020. Gross profit was RMB 2.8 billion in Q3 compared to RMB 4.4 billion in the same period of last year. Gross margin was 15.2% in Q3 compared to 21.3% in the same period of 2020. The decrease in gross margin was mainly due to a lower contribution margin of the existing home transaction led by a decrease in net revenue from existing home transaction and the relative flat fixed compensation costs for Lianjia agents. Operating expenses were RMB 5.1 billion in Q3 compared to RMB 4.5 billion in the same period of 2020. General and administrative expenses were RMB 2,412 million in Q3 compared to RMB 2,649 million in the same period of 2020, mainly due to the decrease in share-based compensation expenses which was partially offset by the increase of personnel costs and the bad debt provision.
Sales and marketing expenses were RMB 1,202 million compared to RMB 1,026 million in the same period of 2020, mainly due to the increase of headcount in business development personnel. Research and development expenses were RMB 1,043 million in Q3 compared to our RMB 789 million in the same period of 2020, mainly due to the increase of headcount in experienced research and development personnel.
In addition, we recognized the impairment of goodwill of RMB 397 million in Q3 compared to nil in the same period of 2020. Based on more consumptive and longer-term view of outlook of the business of operation of acquired assets, we conduct a comprehensive risk assessment and asset valuation and made sufficient impairment provision accordingly. Loss from operations was RMB 2.3 billion in Q3 compared to a loss of RMB 81 million in the same period of 2020. Operating margin was negative 12.7% in Q3 compared to negative 0.4% in the same period of 2020, primarily due to; one, a relatively lower gross margin in Q3 compared to the same period of 2020; two, the increase of percentage of total operating expenses as of net revenue in Q3, primarily due to the decreased net revenue along with relatively flat recurring operating expenses and additional impairment of goodwill as well as severance provision of RMB 250 million incurred in Q3 compared to the same period of 2020. Excluding non-GAAP items, our adjusted loss from operations was RMB 1,435 million in Q3 compared to adjusted income from operations RMB 1,740 million in the same period of 2020. Adjusted operating margin was negative 7.9% in Q3 compared to 8.5% in the same period of 2020. Adjusted EBITDA was negative RMB 550 million in Q3 compared to RMB 2,248 million in the same period of 2020. Net loss was RMB 1,766 million in Q3 compared to net income RMB 75 million in the same period of 2020. Excluding non-GAAP items, our adjusted net loss was RMB 888 million in Q3 compared to adjusted net income of RMB 1,858 million in the same period of 2020. Net loss attributable to KE Holdings Inc.'s ordinary shareholders was RMB 1,765 million in Q3 compared to RMB 271 million in the same period of 2020. Adjusted net loss attributable to KE Holdings Inc. was RMB 887 million in Q3 compared to adjusted net income attributable to KE Holdings Inc. RMB 1,857 million in the same period of 2020. Diluted net loss per ADS attributable to KE Holdings Inc.'s ordinary shareholder was RMB 1.5 in Q3 compared to RMB 0.33 in the same period of 2020. Adjusted diluted net loss per ADS attributable to KE Holdings Inc.'s ordinary shareholders was RMB 0.75 in Q3 compared to adjusted diluted net income per ADS attributable to KE Holdings Inc.'s ordinary shareholders RMB 1.38 in the same period of 2020. As of September 30, 2021, the combined balance of our cash, cash equivalent, restricted cash and short-term investment amounted to RMB 52.7 billion or USD 8.2 billion. Additionally, as of September 30, 2021, the balance of our long-term cash items, mainly including the long-term investments, amounted to RMB 15.9 billion or USD 2.5 billion. As we mentioned at the beginning, although there have been some turbulence in the housing market recently, which brought a significant negative impact to our business in short run, that is also a chance for us to take a moment and look inward, focus more on the essence of our business and refine our management and distribute the resources more effectively, paving the way for upsized opportunity and to allocate for the long run. Our decades of experience going through numerous challenges would give us capability to remain steadfast against the market volatilities while cope with agility. In face of market downturn, we closely observe market change and timely adjust our business strategy to ensure the rapid implementation of those adjustments. Our initiative includes more focus on efficiency, cost management to boost synergy and allocate resources more efficient oriented and risk averse. There are some measures in these 3 aspects to ensure the company is back to operation after the new normal. For example, we introduced the new operation metrics including the number of active store and active agents on our platform to better reflect our business programs.
Furthermore, we attach great importance on our accounts receivable collection by building a comprehensive risk control mechanism to closely monitor and then evaluate the developer's credit quality changes. In third quarter, we have booked better provision for all remaining receivables related to Evergrande and several other developers with a negative public opinion in order to reflect their recent credit quality changes. Turning to Q4 guidance. According to Beike Research Institute, nationwide GTV of existing home sales market is expected to fall over 47.4% year-over-year in the fourth quarter. Meanwhile, nationwide GTV of new home transaction market is expected to be 20.1% year-over-year in the fourth quarter. Based on above consideration, looking forward to fourth 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 31.6% to 36% from the same quarter of 2020. This guidance reflects the potential impact of recent property market-related policy measures and the company's current operating review of the business and the market condition which is subject to change. Over the course of this year, despite many challenges we have encountered, we have been and will continued to weather the troubles, just have provoke us to focus on ourselves, not let the noise, inspiring every individual in our organization to fight, fight, fight, but to never ever give up. We will never give in, we will not back down, and never stop doing what we know is right.
We fully embrace the policy change and strongly [ be able to insurance ] the housing for living, not for speculation while brings a long-term favorable environment for the industry. We will stick to our path with a full commitment to serve our clients better. We are confident that we will stay resilient and have our value recognized. This is what we have been doing not perfectly, but we are on our way. That concludes our prepared remarks. We would like now to open the call for your questions. Operator, please go ahead.
[Operator Instructions] And the first question we have is from Liping Zhao from CICC.
[Foreign Language] I will translate for myself. I have 2 questions here. Firstly, we have seen marginal improvement in terms of falling housing mortgage rates recently. What do we think of these positive signs? And can we expect the real estate market to bottom out regulation-wise in the near term? Speaking of transactions, when will we see a rebound in terms of transaction volume? And secondly, investors are concerned about the state-owned property listing systems, which are regarded by some as replacements for third-party brokerage platforms. What do you think of the government's attitude towards the mutual positioning of real estate brokers?
Thank you, Liping. Let me address your question. Regarding your first question, the decision and the deployment of the long-term guidance of the real estate market are encouraging and effective. We have witnessed the largest ever regulatory package in terms of the quantity and the type of policy, including restriction on property purchase, loan, sales, pricing, land auction, irrational price cut, financing and the payment as well as the potential property tax.
Accordingly, the property market across China quickly froze in Q3. The in-home sales market dropped 41.6% year-over-year in GTV, on par with our guidance in the last earnings release call. The decline of the new home market was largely within our previous expectation, down around 14.1% year-over-year. The downturn in Q3 was across the board rather than one single segment, showing a trend backed from the credit tightening to the cooling off of in home sales and then to the new home sales and land market where price cut in third quarter versus the existing home sales expectation.
As the expectation and the behavior of market participants led to a pattern of credit crunch impeded the transaction and downward revision of expectations. In particular, transaction volume of existing home sales market continued to drop month-over-month in Q3 to a long-term historic low with some cities to a 10-year low record. Housing price fell widely, and our homebuyers [ sustainability ] index has fallen to a low level since 2019. The largest impact comes from the sharp fluctuation in loan origination basis. As the first year adopting the housing loan concentration management, we saw a mismatch between the prices [ play ] and the marketplace. The average loan origination cycle is new to extent in Q3, 77% loan growth in the same period of last year. A large number of [Technical Difficulty] [ potonking ] transaction have also been affected. In the same time, a total of 14 cities introducing the new home reference price policy. Some payment requirement for the house purchase were [ rigged ], while reduction expectations on property price and overall market sentiment has been significant [ sendent ]. On the other hand, new home sales in China also dropped sharply in Q3. From July to September, the new home sales area sold in China decreased by 9.5% and 17.6% and 15.8% year-over-year, respectively. Market in September was the worst 1 in 7 years. The new home sales market and the existing home sales market are highly correlated. In China, around 40% of new homebuyers come from the improvement demand of [ leasing ] homes of the existing home owners. The [ standard loan ] cycle and the wait and see sentiment for the existing home sales market affect purchase price for the new homes. The new home price falling under the [ heightened ] rate in certain developer further deepens the wait and see sentiment among the buyers led to new home sales market cool down [ promotely ]. As the new home sales channel in Q3, a season during the so-called cash is king. Developer who are motivating sales channel wildly to accelerate the sell-through and leading to an increased penetration rate for the sales channel. However, risk in new home sales channel are also mounting up, because developers [ squeeze ] their suppliers' working capital, resulting the delayed payments of accounts payable also for the accounts receivable to the suppliers due to some [ indus tin ] supplier. Looking to the incoming policy and the regulations. In short term, policy insurance are expected to pick up and the market answers to a period to [ side drive ] the previous market curves and we believe it is unlikely for further policy tighten up. In terms of the housing price according to Beike Research Institute, at the end of September housing price dropped 1.5% on average from the highs this year, with some cities [ cracking ] on the price cut. In terms of deleveraging to improve the financial [ healthy ] in 2020, 40% of 100 listed developers successfully lowered their risk grade versus 2019. In Q3 2021, residential housing leverage [ repalled ] to a 9-years low. In October, our vice premier of State Council Liu He say that the reasonable capital demand in real estate industry is being met, and that China will [ need ] to change the path towards the house environment. At the same time, other financial regulators also respond to market concerns. Given the effective regulation results and the falling transaction volume and the [ sur price ], we foresee a significant lower frequency of the policy tightening we had in Q4 versus last quarter, with the pace of the real estate credit supply be stabilized, which may bring some marginal changes to the market, but policy impact on the market sentiment will last for a considerable period of time. From the long-term perspective, China's economy upgrade from a high-speed growth model to a growth [ that be better ] balanced one, we still see overall tightening of real estate financial policies. The acceleration of pilot property tax reform signals the advancement of long-term mechanism and unchanged pursue of deleveraging and derisking both sides [ is a represent in the debark lines ]. Despite the [ enactable shorten tense ], we expect to see a healthier and more orderly growth in market in the future. So based on our observation, as I mentioned, the downward pressure on the existing home and the new home market will continue beyond Q3. Looking to our Q4 2021, the GTV of existing home sales market is estimated to further decline down nearly 50% year-over-year and 25% quarter-over-quarter. Meanwhile, the GTV of the new home sales market will drop by 20% year-over-year. For 2022, GTV is expected to drop by more than 10% for existing home sales market and slightly for new home sales market. So up through the GTV level for its in-home and new home markets are expected to bottom out in Q1 2022. In the second half of 2022 as the market fully pricing the regulatory policies and stabilize [ regi ] demand while coming and the natural market recovery process could start, therefore, Beike want to reiterate our position to the market. Don't underestimate the power of the policy to correct market deviations and don't underestimate the supporting power of [ marking ] supply-demand dynamics. Regarding the new home sales market [ relieved ] by the mounting short-term debt repayment pressure, [ the van will ] push themselves to promote sales and [ cry ] cash. From the long-term perspective, as delever shift from financing driven to operation driven in our sales focus approach that will face the higher requirements on product development and the target sales. Given the increasing divergence across cities, developers increasingly customized the sale strategy and the comprehensive use of sales channel should be a clear long-term track, namely increasing penetration rate of new home sales channel [ while comes in ] as a clear long-term trend. It also presents more opportunities for Beike to pursue full cycle partnership with developers. In short, the unprecedented policy regulation and the rapid market pulling out in 2021 brought a profound market [ crisis ]. Over the longer horizon, the market is not as bad as what we perceive at this moment. In terms of annual volume, the market-wide transaction volume this year will still pass the growth versus last year. While the policies such as the existing home reference price have not changed the long-term supply and demand dynamics as the mismatch between land, credit supply and home purchase should be gradually improved. So from a long-term perspective, market fluctuation are normal, but the long-term mechanism being in place [ as the ] overheated or [ overcooked ] market will normalize to the period of supply-demand balance. Regarding your second question, so I would like to say at the central government level, a well established administrative implemented system is a crucial step to standardize the real estate market orders. And a robust real estate transaction administrative system can help governments to effectively price property listing and transaction data take effective decision and regulatory actions [ end the wild swings ] in the market due to potential land policies. Also, that can help governments to address the issue of fake property listing and the vicious competition [ haunting ] the industry. That's contributing to the better performance of the service provider and benefit for those who commit to quality service like Beike. As a consistent advocator and beneficiary of the regulated and collaborative market, Beike formally supports government to upgrade the administrative systems and is working with government department in Beijing, Nanjing and [ surrounding cities ]. At the government level, local real estate [ eon ] administrative system dates back to 2012. Since then, real estate [ eon ] administrative system with similar functions have been established in 9 cities including Beijing, Shanghai, Chengdu and Xiamen according to current statistics. So for the purpose of this system, we want to clarify that firstly, government has no intention to directly intervene in the transactions and are in a better position to govern the market through a well-regulated commercial institution to navigate through the various transactions. Transaction processing involves a significant rate, which can be shouldered by commercial player for government. On the contrary, the right engagement in transaction by the association of government requires a significant commitment of talent and financial resources, including formulation rules, research and development investments and continuous system maintenance and iteration and is also exposed to the rates in the [ transact ] process. Secondly, governments are digitalizing the livelihood service, including the social security, housing, vehicle, health care modules. Our property listing model has been included in the local administrative system of Hangzhou and Shenzhen, which is introduced as a partial normal local [ee ] administrative system upgrades. Thirdly, there have been [ hunting hunter ] transactions without the intermediary across the country. Taking Hangzhou for instance, from 2019 to September of 2021, on average 20% of transaction volume come from [ hunting hunter of ] brokerage free transactions, mostly between the family and the friends. [ Soos ] upgrades [ at the ee ] of the administrative system in place can steer those transactions into a more convenient [ at the ] sale process. In terms of outcome, the deliverables of a compliance information system [ or transaction ] system depends on the level of improvement of consumer experience and transaction efficiency as the talent and the financial resources commit and the operational experience accumulate over time. Beike's proven track record across cities that have been deployed online, [ we of the she of ] implement system for years, also demonstrates that a standardized market actually contribute to the rise of [ corkid ] agents. A standardized marketplace with authentic property listings has the most impact to those who attract traffic through the fake listings. And those who rely on the malicious competition and are [ ice co ] order or customers stealing to [ parisitize ] on our quality service management platform. We believe that, along with upgrades of the administrative system and further market sanitation in efficient supply will be further [ scrape up ] that benefiting quality service providers. And for Hangzhou, brokerage freight transaction tends to remain stable in terms of absolute volume as most of them are not affected by the change in the market conditions, like the transfer between family members. So we recent [ for see ] in Hangzhou, the upgrade of the government's online existing home listing system has significant impact to the local transactions like [ Weiwei atya ] and Beike's [ brands ] locally. And for [ shinto ] based on what we know so far, the function of [ shinto ] real estate information system mainly include first, only [ if you are code ] generate for property firstly, based on the government information system, can the property owners publish their listing in other website. In this way, that ensure the fake property listing frequently seen on the platform can be further dispelled. This is good for Beike but for a so-called amazing website. And the property owner is required to engage exclusive sell-side agents within a given period of time. Just transformation against the marketable listing agent model in the industry helps to solve the problems of our [ ice co ] order sitting at the low [ holidys ], low price competition that have been plagued the industry. The system is designed to purify the industry environment and standardize the home [ consa ] market. Now on Beike's platform consumer are accessible to more home listing and agent information, while agent can seek efficient collaboration supported by the platform rules and the infrastructure. Beike's core platform value and operation capability are benefiting from those large government [ e automin ] administrative systems security.
We have the next question from the line of Miranda Zhuang from Bank of America.
[Foreign Language] Can you please elaborate more on the latest development and expectation for home renovation business and other new initiatives?
[Foreign Language]
Yes. Let me quickly translate. [Interpreted] So this is Stanley. Let me quickly address your question. So firstly, the home renovation decoration business is very similar like the housing transaction business, meaning the overall industry size are very big. But overall, the user experience are extremely worse. So we do believe in this industry, we have a lot of opportunities can continue to leverage what we have accumulated in the past 2 decades. So for the home decoration business, we do have a couple of [ takes ] in terms of the overall outlook, right? Firstly, the overall China customers will continue more focus on the qualities. We do believe that will be the fundamental, right? Because for the -- if you look at recently, the policy trend definitely the golden times for the new homes it pretty much has been passed. So the next year, it definitely will be the people is more focused on the joyful living. So we do believe the opportunities will be arising from this kind of transition period. Secondly, we do believe the scientific management will continue to help us and also help the industry to upgrade, right, especially followed by some of the other initiatives, for example like more digitalization, we do believe we can restructuring and continue our practice about those kind of scientific management into the home decoration and renovation business. And thirdly, it's about the value about the service providers in the home decoration and renovation business. If you look at the overall -- the conditions for the service providers in the home decoration and renovation industry is still relatively low. So by doing the continuously training as well as upgrade for those kind of professionals, we do believe it will help us to continue to help those kind of service providers to further improve their professional career as well as the whole professionalism for the whole industry. So in summary, we do believe the decoration -- home decoration and renovation business it's not a naturally so-called fast industry, right? It means we continue to dedicate doing the things difficult, but right, right? That's behind that, that means there will be a lot of challenges as well as difficulties we're facing. But we do believe our face, as well as our opportunities, as well as a method we actually has been accumulated in the past 2 decades, will bring the continuous value into this industry. And meanwhile, from the cognitive side, I think some people are talking about the difficulties for the home decoration business, whether it could be surplus like RMB 1 billion revenue in one city and whether a company could achieve like RMB 10 billion of the revenues overall. So we do believe I mean, definitely, there will be some of the new players emerging from that industry and to reach those kind of RMB 10 billion of revenue milestones in the foreseeable future. And definitely Beike also, we have a lot of opportunity to achieve that as well.
[Foreign Language]
[Interpreted] So in summary, as I mentioned before, so we do continue to focus on the 3 parts of our efforts, right? So firstly, how we can -- around the home services we can further improve the SOP management as well as by upgrading the home service procedures by the continuously digitalization. Secondly, the scientific environment will be our key focus as well. By doing this, we can continuously improve the efficiency for the whole industry. And third part and most importantly is how we can continue to bring the value to the service providers into the home decoration and renovation services and continue to improve their professionalism as well as improve their dignity for the work. So all in all, as I mentioned, in generally speaking, in terms of our home renovation and decoration services, we'll continue to focus on how we can further improve the overall customers' user experience. We do believe that's a very tough campaign for us, but we have the trust as well as the confidence we can continue bringing our mission into reality which means the service provider with dignity as well as joy for living ultimately.
[Foreign Language]
[Interpreted] This is Stanley. I also wanted to give you additional colors in terms of the previous question regarding to the so-called the e-government and administrative systems rumor, right? So what we do believe is definitely there will always be a bigger problems underneath of the smaller platforms, right? So in order to better -- to see what the intention behind of the government, we need to look at the policy trend in China. If we look at the general -- the policies in China, definitely, there are 2 major parts. One is house [ for ] living in [ norfos ] regulation. And other one is the encouraging of both of the housing purchase and renting, right? So based on those 2 of the fundamental policies as well as add on the recent trends such as the pilot program for the property tax, we do believe during that kind of [ dow finity ] of the policy trend, that Beike's value will continue to shine since we can provide a very comprehensive solutions and which is quite in line with those kind of policies trends going forward. And meanwhile, we do believe our -- as we mentioned before, so our -- the fundamental orientation for our business is also quite in line with 2 of the policies' direction, right? So -- and under those kinds of assumptions, we do believe some of the rumors will be definitely fade away in the market. And as far as we can continue to hold on -- adhere to the policy continue to improve the efficiency as well as improved user experience, we do believe the Beike's value will continue to shine and will continue to bring the value into the whole industry.
We have the next question from John Lam from UBS.
[Foreign Language] I have 2 questions. The first question is mainly on the property tax. So how the property tax affect the buyers' and also the sellers' sentiment and also their purchase behavior. And also, not sure if management hear anything regarding on the implementation details of the property tax. Second is regarding on the competitive landscape. So first, on the one hand, we have seen centralized have massively lay off people, about 7,000 people. And also, the senior management also left the company. But at the same time, a major online news media company, [ Tuoxiao ], they also announced to enter into the property agency sector. So how the management feel the property agency competitive landscape.
Thank you, John. Let me address your first question regarding the property tax. Recently, as indicated in our IC published by President Xi [ on Journal Xo Shou ], China should strengthen the regulation and adjustments over the high income price, proactively and prudently promote legislation and reform our property tax, and ensure effective implementation of our pilot program. We believe that the government will definitely [ and durably ] expand the scope of the pilot property tax to more cities. In October, the council is authorized to carry out a pilot property tax reform in certain regions. Property tax as a new local tax package well plays a fundamental role to narrow down the gap between the region approved. Considering the requirements on proactively and prudently promoting the legislative reform on property tax coupled with the current [ marquee ] traction since late September, will make affording the existing home sales volume at the price as well as the mounting [ rise in the rappers ]. We recently see a current focus while stabilizing expectation and preventing overcrowded market. As [ expected ], the scope of pilot property tax will extend to more cities applicable to all existing residents [ incentive ] incremental. Nevertheless, the focus of the property tax should be on multiple residents or the residents with higher total value [ versus ] high unit price, fully consider affordability of the household to ensure the basic living needs while attaching importance to [ tend to wild scat ] amongst the households to better achieve the goal of common prosperity. The introduction of a property tax will have a significant short-term impact the market. So owners of multiple residences may sell part of their properties leading to a higher market supply and enhance the wait-and-see sentiment amongst buyers in the short term. However, from the long-term perspective, transaction volume is predicted on housing supply and demand fundamentals. The rational launch of the property tax by laying a solid foundation for effective common prosperity will contribute to stable long-term market expectation and prices. Only in such scenario with a stabilized price rationalize the market and smoothen the fluctuation in the long run, can [ regi ] demand be further unleashed, resulting in a higher home churn rate, better affordability and the roofs for everyone, and enhance the potential growth in transaction volume.
Regarding the current market situation for Beike [ duns and Central land ], let me talk about separately. Let me talk about the [ Beike duns ] first. And it's obviously for the company like [ Beike duns ] with cross-industry traffic advantage, that is a natural impulse for them to try to monetize their traffic in different areas. We believe that both investment community and [ Xinpuli ] fully understand that in the industry with a low frequency, high value transaction and a long decision-making process, the value provided by the online traffic model is relatively [ meet ] and it cannot truly meet customer demand for information. [ Results ] of thorough understanding of the customer and the industry, even traffic advantage, are difficult to convert to the transactions. To integrate the online module with offline module, one cannot resort to [ short-termism ] such as fair competition and capital-based disorderly dysfunction, including setting low commission rates, higher rebate, unrealistic banding valuation promise. This definitely false proposition, which will now sustain and could cause antitrust violations. In part of the last year, mega-Internet companies and developers entered into the industry with high profile all walked away later with the rationale is approved. [ GMO Hofang and Fantrom ] are good showcase for their reference. In this industry, there must be more than one base model and more than one company that can be successful. [ On go ] forward, there's only one way to success. We believe in the value of taking good care of the consumers. We believe in the value of sharing successful experience in infrastructure to the industry and empower and enhance industry efficiency. We believe in the value of protecting the interest of the service providers, paying commission in time and to work with the [ central for security and finance ]. We believe the value of the hundreds of thousand [ ison ] service providers who have been serving the [ community ] for many years, and established its unique [ amount Lianjia ] home services and [ weighted ] in the value of time. This is what we have been doing, not perfectly, but we are on our way. Last but not least, if Beike does still decide to move to the offline transactions, especially [ under ] the current market momentum, we believe that we'll have the lessons learned from the market and the players who truly understood this home industry like Beike. And for the central land and -- I do [ sof news ] -- and I cannot comment our multiplayers decision and the behavior, but I would like to say the key and the high-quality service provider represent the most valuable assets of the industry. During the period of downturn, Beike will formally support the retention of our key and high-quality service provider through our compensation and benefit system. Team culture and organizational capability and the business strategy developed over years. Meanwhile, Beike's [ leasing ] commission mechanism and the network effect, allow each agent to have much more opportunities to participate in transaction and secure more stable income than those on the other platforms, and help them enable collaboration and shared success. As a result, the overall turnover rate of agent as a percentage of store closure on the platform are significantly lower than the industry average. We are more resilient in the downturn and have the ability to outperform when the market recovers. As the market is in the doldrums, the industry production capability is shrinking and the performance of the store on Beike's performance also have some impact. In the third quarter, the number of stores below the minimum sustainable level of turnover, the so-called bright line, the annual GTV of 50 million, on the platform continue to rise and as a percentage of store above such level decreased from 37% in Q2 to 33.7% in Q3. So we don't know the overall turnover rate of the industry, but we can imagine how depressed the industry is. In the downturn cycle, the trend of [ huddling ] together to keep warm in the industry is the more evident. We noticed that the cooling of the market promotes more stores and agents who were reluctant to join platform, finally joined the Beike platform. The number of brands [ financial ] Beike increased to 300 in the third quarter and also the percentage of newly added stock from -- new home sales channel increased greatly from 22% in the second quarter to 29% in the third quarter. The percentage of store closure due to the poor management, poor operation in Beike only 1.7% compared in Q3 compared to 1.1% in the second quarter, indicating no large-scale store closure. Most of the third-party store owners chose to stay with the platform in downturn cycle and operate conservatively by dismissing [ in vision ] personnel and the [ some bank merge ] store and as a percentage of store merge on the platform increased from 0.8% in the second quarter to 1.4% in the third quarter. This quarter our number of client stores and agents and for the overall turnover rate was 8.8% compared with 8% in first quarter. The turnover rate of Lianjia in Beijing and Shanghai remains stable, while the turnover rate of [ non-Lianjia ] agent increased by 1% quarter-over-quarter then remained flat compared to last Q3. The average turnover rate in the industry is 15% on normal days, and will get worse in downturn cycle. The turnover rate of agent on Beike is still considerably lower than the industry average. So based on our judgment of the market, the industry production -- so based on our judgment on the market, the industry production capability will continue to shrink, and it is back to the -- [ our ] agent will be balancing out in the first quarter of 2022. Consequently, we would like to see the [ turnover ] of putting performance store [ age ] increase significantly in line with the market trend, but outperform the market conditions. Okay. Thank you, John.
Thank you. We are 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 for joining us today. If you have 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 at the next quarter. Thank you, and goodbye.
Thank you.
Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now all disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]