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China's Major Property Sales Brokers Will Drive Small Agents Out Of Business Amid Surge In Fundraising, Says Fitch

Intense competition between agents selling lived-in homes will eventually leave just a handful of large operators, the ratings agency said in a note The prediction comes amid a slew of major fundraising efforts by big Chinese estate agents

China's Major Property Sales Brokers Will Drive Small Agents Out Of Business Amid Surge In Fundraising, Says Fitch

Hundreds of small property agents in China will disappear completely as their much bigger rivals take over their business amid a surge in capital from investors, according to Fitch Ratings.

Ramped up competition between agencies selling lived-in homes will eventually leave just a handful of large operators, according to a note published by the international credit ratings agency on Thursday.

"There are over 1,000 agency brands in the property broker sector, mostly micro and small ones," said the authors led by associate director Karl Shen.

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"The sector will see higher concentration as competition intensifies and leaders continue to expand via M&A [mergers and acquisitions]. Thirst for capital will not be quenched until there are ultimately only a few major players, or a super one versus a few major ones."

The prediction comes amid a slew of major fundraising efforts by big Chinese estate agents.

Shanghai-based real estate platform Anjuke Group filed for an initial public offering (IPO) on April 8 on the Hong Kong stock exchange.

The Tencent-backed company's application came nine months after one of its main competitors, KE Holdings, raised US$2.12 billion in its debut on the New York Stock Exchange. Shares of China's biggest online property platform have more than doubled in value since its debut in August last year, with its market value reaching US$58.6 billion.

Zuo Hui, controlling shareholder of KE Holdings, formed the company in 2018. Seventeen years earlier he had founded Beijing Homelink Real Estate, also known as Beijing Lianjia, which grew to become one of the country's largest offline property brokerages.

Zuo then consolidated Beijing Lianjia with other agencies including Century 21 China Real Estate and Zhonghuan Real Estate to form KE Holdings, which is better known as Beike Zhaofang.

"Sector leaders have rushed for public listings and bond issuance in the past few years amid rising M&A and outlet expansion [and] the capital thirst is likely to be sustained," said Fitch in the note.

It said a faster expansion of secondary home sales in China would drive rapid growth in the property brokerage sector.

Fitch expects to see 12 per cent year-on-year growth of existing home sales between 2020 and 2025, double the annual increase of 6 per cent between 2016 and 2020.

Second-hand home sales will contribute 60 per cent of total housing transactions in major cities in the coming years, "thanks to a rising stock of homes sold in the past and boosted by freer labour flow encouraged by the government," the note said.

China's residential property market will become more like that of the US, according to Yan Yuejin of the E-house China Research and Development Institute.

"China's housing market will get more mature and healthy in the next couple of years with more lived-in home transactions, like the market in the US, instead of the boom of new home sales that we saw in the past decade," said Yan.

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