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Market Review for the Year 2023
In 2023, the real estate industry continued to undergo major adjustments, and sales of commercial properties plummeted in China. According to data from the National Bureau of Statistics, the sales area of commercial properties in China was 1.12 billion square meters in 2023, down by approximately 17.7% year-on-year, with sales value at RMB11.7 trillion, down by approximately 12.5% year-on-year. To promote the healthy development of the industry, the central and local governments introduced policies to protect the market, both on the supply and demand side. Policies have been gradually relaxed in the pursuit of stability and practicality, hedging the market downturn and bringing stability to the market.
It will nonetheless require time to regain confidence and momentum during the market adjustment stage — a period in which the agency industry has been seriously affected by the general environment, with competition continuing to intensify as well. Despite the challenging operating environment, the Group has remained pragmatic and proactively employed a series of adjustment measures to seize industry opportunities and respond promptly to changes.
Business Review of the Group
As at 31st December, 2023, the Group’s turnover reached approximately HK$1,295 million (2022: approximately HK$1,517 million), a decrease of approximately 15% from the same period last year, and loss attributable to shareholders amounted to approximately HK$531 million (2022: approximately HK$580 million). Basic loss per share was HK78.8 cents (2022: HK86.1 cents). The board of directors did not recommended the payment of a final dividend for the year ended 31st December, 2023.
Turnover of the Group’s property real estate agency business in 2023 was approximately HK$1,251 million (2022: approximately HK$1,426 million), which accounted for approximately 97% of the Group’s total turnover, while the turnover of the financial services business was approximately HK$44 million (2022: approximately HK$91 million), which accounted for approximately 3% of the Group’s total turnover.
For the entire 2023 year, the Group’s total value of properties transacted was approximately RMB110 billion. It handled a total of approximately 53,000 transactions with a total gross floor area of approximately 5.5 million square meters.
1. Property Real Estate Agency Services Business
Turnover from the Group’s property real estate agency business fell from approximately HK$1,426 million in 2022 to approximately HK$1,251 million. In July 2023, the management put forward the management requirements of “saving cost, increasing income, raising quality and efficiency” and comprehensively implemented management improvements for the Company. Firstly, focusing on the main business as the core, the long-term lease business in Guangzhou and Shenzhen has been transferred, and managed under the “internal marketisation” principle. Secondly, the Group has implemented a “comprehensive budget management” approach, guided by a capital plan. This initiative aims to strengthen receivables collection by improving overall staff efficiency through the organisation of similar business types, streamlining the empowerment platform, and eliminating inefficient projects. Thirdly, with regard to internal informatisation, reform and upgrade were carried out in phases to integrate the “business — manpower — financial” systems in order to improve the efficiency of the internal decision-making process and reduce overall management costs. The fourth area that the Group has targeted is cash flow and profitability. The Group actively reduced inefficient projects in some regions and cities, to increase project efficiency and per capita transaction amount. Although the market was still in a period of in-depth adjustment and periodic risks have yet to be eliminated, the performance of the Group’s property real estate agency services reached the Group’s pre-established goals in 2023, owing to the implementation of these management measures.
Despite the difficulties, the Group has continued to strive for breakthroughs during the review year. It remained committed to comprehensively developing diversified services centered on real estate transactions, deeply integrating into China’s urbanisation and urban upgrading development process, and further intensifying development of the real estate internet marketing and new media business. At the same time, the Group has maintained focus on meeting customers’ needs and actively consolidating industry resources. By leveraging business digitalisation and informatisation, the Group provided customers with comprehensive and diversified services, broadened its online customer base, and promoted the growth of its property real estate agency services business.
In response to market developments, the secondary real estate agency business promptly adjusted its structure to leverage its strengths and mitigate its weaknesses. Firstly, it continued to leverage resources and layout advantages of medium and high-end luxury properties in Guangzhou, focusing on targeting projects and customer retention. And secondly, it promptly adjusted the organisational structure, streamlined the proportion of back-office personnel, enhanced the efficiency of back-office services, and optimised the company’s operating cost structure.
At present, the Group’s property agency business covers more than 50 large and small cities across the country, with more than 900 agency projects and approximately 110 secondary branches.
2. Financial Services Business
Affected by the overall investment environment, the financial services business recorded turnover of approximately HK$44 million (2022: approximately HK$91 million).
During the year, the business focused on serving existing high-quality customers, and took a prudent and pragmatic stance in implementing strict risk controls and conducting business operations. It also actively adjusted its positioning and strategies to respond to changes in the market and related regulatory policies in a timely manner.
3. Other value-added services
The valuation research business was actively restructured during 2023. First, various data releases were optimised in terms of pace and data coverage to enhance timeliness and breadth. Additionally, efforts were made to promote the productisation of research results, thereby boosting brand influence. Furthermore, new media content was cultivated, and research outcomes were utilised to develop solutions for home-buying customers.
The focus of the asset appraisal business has returned to core service capabilities and expertise, leveraging technology to meet the growing demand for appraising new asset types, transfer and disposal of corporate assets, and various incremental businesses.
Prospects for 2024
Since 2023, the Chinese government has actively made efforts to stabilise assets, implementing numerous easing measures. On the regulatory side, the four major first-tier cities simultaneously liberalised loan and purchase restrictions, vigorously stabilizing market expectations. On the monetary side, the market was boosted by extraordinary measures designed to reduce interest rates and RRR, which further highlighted the value of core assets. The 5-year Loan Prime Rate (LPR) fell sharply to 3.95%, with lower interest rates for residential mortgages helping to promote home purchases. On the financing side, the real estate financing coordination mechanism was implemented quickly to resolve project-related issues, helping to stabilise market confidence. The year 2024 will be a time of recovery for the mainland real estate market, with the contradiction between supply and demand expected to further ease. As favorable policies are gradually introduced, home prices are anticipated to slowly stabilise. The prices of homes in first-tier cities will be the first to rebound, and properties with quality improvements will be more sought after by the market. In 2024, the Group plans to implement the following measures:
1. Strengthen the new housing business. To continue to consolidate the Group’s business advantages in Guangzhou and the Greater Bay Area, and further optimise the layout and scale of the new housing business.
2. Improve existing transactions, valuation research and appraisal, and other businesses. In 2024, the Group will continue to strengthen existing businesses and the synergies between its primary and secondary real estate services. At the same time, it will comprehensively upgrade its talent, resources and operation roadmaps to boost its business growth and income generation capability.
3. Seek breakthroughs in new operation models and promote technological development. Cultivate the new media business, actively cooperate with Internet companies and adopt Internet technologies to empower the Group’s offline transaction service advantages, and gradually develop multi-channel network (MCN) and other innovative businesses, as well as construct online platforms to expand the scale of resource integration and enhance the Group’s across-the-board competitiveness.
Recently, China has introduced a series of systems and measures, proactively implemented monetary policies, fully relaxed property purchase and loan restrictions, and advanced the real estate financing coordination mechanism. The supply and demand disparity in the market will gradually dissipate, and the market is expected to stabilise. As always, the Group will adopt a prudent and pragmatic approach, further improve its service standards, continue to develop innovative businesses, work diligently to achieve a business turnaround as soon as practicable and promote sustainable development.