The proportion of second-hand home transactions is rapidly increasing. Will Beike deliver more value?

The real estate market is warming up, and with the smooth implementation of the “One Body, Three Wings” strategy, KE Holdings has achieved steady performance.

Recently, KE Holdings released its Q1 2025 earnings data, continuing the growth seen in the second half of last year. In the first quarter, total gross transaction value (GTV) reached 843.7 billion RMB, a year-over-year increase of 34.0%. Net revenue was 23.3 billion RMB, up 42.4% year-over-year, with a net profit of 855 million RMB.

Specifically, KE Holdings’ operations show many highlights. First, the transaction volume for second-hand and new homes significantly exceeds market averages, demonstrating the competitiveness of leading companies. Second, the rapid growth of rental and home renovation businesses has become new growth engines.

High Growth in Brokerage Business, Non-Real Estate Transaction Services Become “Second Growth Curve”

The brokerage business is KE Holdings’ core operation, consistently outperforming expectations since the second half of last year.

Of the 843.7 billion RMB total transaction volume in Q1, resale housing transactions amounted to 580.3 billion RMB, a 28.1% increase year-over-year; new home transactions totaled 232.2 billion RMB, up 53%. Notably, this data was achieved amid real estate sales fluctuations. According to CRIC data, in Q1, the sales of the Top 100 developers declined about 7% year-over-year.

KE Holdings’ ability to withstand cyclical fluctuations largely depends on improved operational efficiency. The company has increased AI technology investments, launching multiple application tools that serve both B2B and B2C.

Among these, the AI house-finding assistant “Pudding” offers users AI-driven deep reasoning combined with real property data to better understand user needs and recommend suitable listings, providing intelligent and efficient house-hunting products. The customer-side assistant “Laike” improves communication efficiency with clients and increases transaction success rates.

Additionally, to enhance operational efficiency, KE Holdings has improved internal management through tools like the Store Owner Dashboard and AI-powered property promotion assistants, as well as offline property focus meetings to facilitate property transfer and circulation. The company also builds platform operational mechanisms, such as a points-based benefits system and regional governance councils, to motivate store owners to grow and promote cross-store cooperation.

In Q1, the average GTV per store and per employee increased by 8% and 14% respectively, indicating improvements in efficiency. Meanwhile, the churn rate for existing stores dropped to 2.9%, a 6% decrease quarter-over-quarter and a 38% decrease year-over-year. Additionally, the six-month retention rate of newly connected stores in the first half of 2024 reached 94%.

Looking at non-real estate transaction services, net revenue in Q1 grew 46.2% year-over-year, accounting for 35.9% of total net revenue, firmly establishing it as the “second growth curve.”

Home renovation and furniture services generated 2.9 billion RMB in net revenue, up 22.3%, with this segment achieving a record-high profit margin of 32.6%, an increase of 2 percentage points year-over-year.

In rental services, net revenue reached 5.1 billion RMB in Q1, a 93.8% increase. According to company disclosures, by the end of Q1, the managed property portfolio exceeded 500,000 units, with “Sigh Rent” managing over 490,000 units.

In 2023, KE Holdings established the “One Body, Three Wings” strategy, where “One Body” refers to new and resale home transactions, and the “Three Wings” are full-home renovation, rental, and KE Good Home services. Notably, the home renovation business has seen rapid growth since its launch in 2021, and the rental business also shows strong growth potential. For KE Holdings, non-real estate transaction services have successfully opened a second growth curve beyond core real estate brokerage, helping to increase the company’s performance resilience.

The Era of Existing Homes Arrives; Improving Operational Quality Is Key

With increased operational efficiency, KE Holdings’ profitability is also improving. The company disclosed that operating expenses in Q1 were 4.2 billion RMB, a 31.3% decrease quarter-over-quarter, with adjusted net profit reaching 1.39 billion RMB.

In fact, after several years of adjustments, the profit margins of KE Holdings’ resale and new home businesses have stabilized. As the profit margins of home renovation and the development of rental and KE Good Home services improve, future operational quality is highly likely to continue rising.

Executive Director and CFO Xu Tao stated, “While maintaining reasonable cost control, we will continue to support long-term business development and fully implement the ‘One Body, Three Wings’ strategy.”

In Q1, KE Holdings’ cash on hand reached 12.773 billion RMB, an increase of nearly 1.2 billion RMB from the beginning of the year. The company paid approximately $400 million in dividends to shareholders in 2024. It also spent about $716 million on share repurchases, representing about 3.9% of the total shares outstanding at the end of 2023, all of which have been canceled. Large-scale buybacks and cancellations demonstrate management’s confidence in future growth and fulfill commitments to shareholders.

Looking at the industry as a whole, since September 2024, a package of policies has driven a recovery in the real estate market, with transaction volumes and housing viewings significantly increasing. The main tone for 2025 remains “stabilization after decline.”

As a leading domestic real estate brokerage, KE Holdings is expected to benefit directly from the market recovery. More importantly, as urbanization slows, the real estate sales market is entering an existing-home era, which is directly favorable to KE Holdings.

According to research from Founder Securities, over the past four years, the proportion of second-hand home transactions nationwide has rapidly increased, reaching a historic high of 46% by the end of 2024, indicating that the second-hand market is gradually becoming an important part of the real estate industry. Additionally, with increasing pressure on developers to clear inventory, KE Holdings will have more room to leverage its value.

Regarding future development, KE Holdings’ co-founder, Chairman, and CEO Peng Yongdong said, “Looking ahead, we are confident in the long-term prospects of the company under the ‘One Body, Three Wings’ strategy and will continue to invest steadily in AI applications.”