Huachuang Securities: Entering the era of existing housing, the advantages of top intermediaries with the ability to continuously update real estate systems are highlighted.

Huachuang Securities released a research report stating that China is gradually entering the era of existing housing stock, with a significant increase in the volume of second-hand housing transactions since 2023, leading to a rapid increase in demand for intermediary services. As long as the intermediary fee is lower than the sum of information search costs, transaction costs, and learning costs, intermediaries will exist. The high proportion of intermediary transactions in mature existing housing markets in both China and the United States also confirms the value of intermediaries. Leading intermediary companies with the ability to continuously update their real housing source system have formed a deeper moat and are expected to benefit from the increase in demand and achieve resonance in beta and alpha. It is recommended to pay attention to leading intermediary companies such as BEKE-W (02423) and 5i5j Holding Group (000560.SZ). Huachuang Securities' main points are as follows: The secondary housing market has high search costs, transaction costs, and learning costs, making C2C transactions difficult, and the core role of intermediaries is to reduce these three major costs. There are three major costs in the secondary housing market: 1) high information search costs, as second-hand housing has non-standard attributes and extremely opaque quality, false listings can also consume additional time; 2) high transaction costs, with a complex transaction process, multiple involved parties, and high risks of fund and property rights transfer. 3) high learning costs, as it is difficult to understand regional housing sources, industry developments, population, market conditions, etc., in a short period of time. The above costs make C2C transactions extremely difficult, and the significance of intermediaries is to reduce these three major costs, such as reducing search costs through real housing source platforms and agent-aided viewing services, reducing transaction costs through fund escrow processes, and reducing learning costs by providing commission buying and selling consultation services, among others. In theory, as long as the intermediary fee is lower than the above three major costs, there is value in intermediary services in secondary housing transactions. The organizational model of the secondary housing intermediary business is to reduce the above three major costs in the most efficient way and improve the efficiency of transaction matching. Mature existing housing market transactions are mainly conducted through intermediary transactions, such as in the United States, where 90% of second-hand housing transactions are brokered through agents. In 2021, the penetration rate of second-hand housing intermediaries in China has exceeded 88%, confirming the value of intermediaries in secondary housing transactions. In the United States, secondary housing transactions are matched through the MLS system, internet information platforms, professional institutions, and unilateral brokers. 1) Based on the guarantee of real housing sources by MLS, internet information platforms import MLS listings, provide online viewing, and agent-aided viewing to reduce search costs. 2) In terms of reducing transaction costs, the United States has institutions responsible for property rights investigation, credit assessment, home inspection, and fund supervision, providing full-process professional and fair services to safeguard property rights and fund security. 3) In terms of reducing learning costs, brokers help negotiate prices, while senior brokers provide professional consultation services for commission buying and selling. In China, secondary housing transactions are mainly reduced through intermediary companies, internet platforms, and bilateral brokers. 1) In terms of reducing search costs, China mainly relies on the housing system provided by internet platforms and traditional brokers for viewing, reducing the search costs of buyers. China has formed multiple models such as internet transaction platforms, where the authenticity, timeliness, and richness of housing sources are highest due to intermediary companies addressing the issue of real housing source authenticity through their own reforms. 2) The reduction of transaction costs mainly relies on the security guarantees provided by some intermediary companies such as fund supervision and home leakage insurance, as well as the process services provided by traditional brokers such as property rights inspection, basic home inspection, and transfer processing. 3) In terms of reducing learning costs, traditional brokers mainly provide price negotiation services and relatively basic consulting services, while commission buying and selling consulting services are mainly provided by emerging self-media viewing brokers. Self-media viewing services mainly provide professional consulting advice at the stage of housing purchase decision-making, essentially reducing learning costs, and most do not directly participate in later stages of the transaction process. 1) China is gradually entering the era of existing housing stock, with a high level of housing listings, differentiated housing prices in different regions, an increase in the importance of housing valuation, and the need to understand policies, markets, housing valuations, industry developments, customer structure, and other professional knowledge before buying and selling houses. The demand for commission buying and selling consulting services is increasing significantly. 2) Self-media viewing brokers provide market information, regional development, and sector characteristics through live broadcasts and tweets to attract clients and provide consulting services at the early stage of housing purchase decision-making. 3) The essence is to reduce the learning costs of secondary housing transactions, and most do not directly participate in later stages such as viewing, price negotiation, and process services. Risk warning: Tightening of real estate brokerage policies beyond expectations, market downturn beyond expectations.