In recent years, China's real estate sector has entered a regulatory cycle, leading the home improvement market to shift from a growth market to a mature market. Currently, the country's existing housing stock has reached 320 million units, with an annual increase of over 10 million units, projected to reach 420 million units by 2030. The mature market has emerged as a new blue ocean for the home improvement industry, and how to find the path to tap into this blue ocean has become a new battlefield for home improvement companies.
 
The existing housing market is vast, emerging as a new blue ocean for the home improvement industry.
The robust growth of the real estate golden period has unleashed considerable growth potential and immense market value for the post-renovation market. Firms in the existing housing era, which rely on traditional extensive growth logic, will face new challenges.
Residential properties sold during the golden era of real estate, with a renovation cycle of 10-15 years, are now facing a surge in renovation demand, propelling the home improvement industry into a new phase.
In addition to the essential needs of property owners, some older residential communities, having been constructed for a long time, have also faced issues such as aging municipal infrastructure and deficiencies in public services. To address the potential safety hazards in these older neighborhoods, the Ministry of Housing and Urban-Rural Development, the National Development and Reform Commission, and the Ministry of Finance jointly issued the "Notice on Improving the Renovation of Older Residential Communities in 2019." This notice incorporates the renovation of older neighborhoods into the urban security and housing project, providing financial subsidies. This means that the renovation of old houses and partial modifications have become a key focus of the new consumer trend in home improvement.
Amidst the favorable multi-party environment, many home improvement companies have recognized the commercial value of the existing housing market. However, the high customer acquisition cost, high construction difficulty, and low average transaction price of existing homes have discouraged some home improvement enterprises. The old house renovation model, characterized by high investment and low returns, seems to be less favored by the industry, and is jokingly referred to as "everybody has an opportunity, but nobody has a sure thing."
Professionals note that in the past, it was common to pre-book new residential projects and gather clients in bulk. Now, faced with a fragmented existing housing market, the client acquisition map is scattered and unclear, necessitating substantial human, material, and time investments for multi-point acquisition. Even with an initial interest confirmed, the cost of subsequent churn is high, indicating higher trial and error costs and, to some extent, increasing client acquisition expenses.
On the other hand, renovation of old houses often requires addressing issues such as unreasonable original layouts and outdated facilities and equipment. The "tear down and build new" approach is more challenging than constructing a new building from scratch and also involves higher budget costs. The emphasis on craftsmanship and higher costs further squeeze the profit margins of renovation companies, leading many to hesitate to take on new orders.
High customer acquisition costs, high construction difficulties, and low average transaction prices form three major obstacles, significantly increasing the costs of renovation projects like old house renovations and partial transformations. This, in turn, affects the realization of profit indicators for decoration companies, indirectly leading to the current situation where "everybody has an opportunity, but nobody is sure of success." However, as the market for existing housing continues to expand, decoration companies should no longer choose to evade or watch from the sidelines. Instead, they should rise to the challenge, increase their profit margins to thrive better and go further.