Watford & Hertfordshire house price news

The first housing data of 2023 has now emerged, giving us an early indication of the market's direction of travel. Our figures show there was a pronounced post-Christmas bounce in January. In fact, asking prices rose by 0.9%, and buyer activity was up 55% from the previous month. 

So, what does this mean for the Watford & Hertfordshire housing market in 2023?

When looking at housing data, it is important to bear in mind that not all indices are compiled in the same way. Rolstons and Rightmove's figures, for example, are based on current asking prices and are therefore affected by market sentiment. Nationwide's and Halifax's are based on sold prices, so they are more accurate but can sometimes run a month or so behind. It means if you want the most up-to-date figures, our data and Rightmove's index are the most useful, although the bounce we are reporting in January is a little misleading. A bounce is a common occurrence at this time of year, and even though demand was 4% above typical pre-pandemic levels (January 2019), it was a third below the more frenetic activity of the same period in 2022.

What it does show is that the market appears to be overcoming much of the hysteria engendered by Liz Truss' mini-budget and is returning to pre-pandemic levels for both prices and demand. There are several factors behind the better-than-expected data - despite increases in the base rate, mortgage rates are continuing to come down (the best five-year fixed rates have now fallen below 4.0%), inflation is likely to have peaked, and both consumer confidence and the economic outlook are improving. In addition, prices are being supported by ongoing shortages in supply caused by the failure to build sufficient new homes.

Paul Gillespie Rolstons, Managing Director says:

"Given that the pause for Christmas came unexpectedly early last year, it was important to see whether buyers and sellers would pick up their plans again at the beginning of this year or wait to see what the first few months might bring. The numbers certainly suggest that activity has bounced back after Christmas, and we will now be busy trying to match the likely revised expectations of buyers and sellers as we move towards the important spring season."

Most commentators also point out, however, that the house price rises of the last couple of years, the cost of living crisis, and higher mortgage payments mean affordability is now seriously stretched, which will keep a firm lid on prices. Stretched affordability, and commuter costs, have also resulted in a growing demand for flats rather than houses, especially in more urban areas. According to the housing portal Zoopla, searches for 1 and 2-bedroom flats have gone up from 22% of all searches to 27%. In London, the numbers are even higher, with 1 and 2-bedroom flats accounting for 49%, up from 42% in 2022. And, in a process agents are attributing to 'buyer remorse' over the flight to the country, a high proportion of those buyers are coming from rural areas.

Watford & Hertfordshire Lettings Market

Affordability is also a serious issue in the rental market, with ever-rising rents pushing tenants' finances to their limits. According to a recent survey, tenants are now spending an average of 24% of their income on rent. In London, it is as much as a third of their income. As a result, despite the continuing gap between supply and demand, rents have fallen for the second month in a row. In December, the average was down by 0.2% to £1,172 per month (figs: Homelet). Rents are expected to resume their rise over the coming months, but not at the same frantic pace as before.

Breydon Duffy, Lettings Manager at Rolstons, warns:

"The cost of living crisis shows few signs of abating anytime soon, with tenants facing rising costs across all areas of their lives. The increasing pressure on tenants looks likely to have a knock-on effect - tenants facing difficulties paying rent could see landlords choosing to exit the market altogether, leading to a spiral that exacerbates the shortage of rental properties and further drives prices upwards."

In the past, people have been quick to blame 'greedy landlords' for any rises, but there is a growing realisation that the blame lies, instead, at the government's door. Unlike other businesses, landlords are unable to offset their financial costs against their revenues. With mortgage costs rising, many are being forced to either increase rent to cover their costs or sell up. The press is, at last, highlighting the issue, putting some much-needed pressure on the government to take action. But will they dare give a tax break to landlords, even if it is in the best interest of tenants?

And finally...

With the onset of Spring, new opportunities will arise in the sales and lettings markets.

Sellers and landlords should start their journey with a property valuation. One of our local experts will answer any questions you have on the area, the market, the sales and lettings process and what Rolstons can do to help your property goal happen in 2023.

Buyers and tenants can get started by registering their details with us to receive property alerts. If you're registered, we will let you know as soon as a matching property hits the market, so you can book your viewing before the rush.