In his most recent interview this month with ‘This is Money’, Fred Harrison, the economist and author credited with developing the 18-year property cycle theory, says that he is still expecting house prices to continue rising until late 2026 before the next big property crash occurs in 2027.
His 18-year property cycle has accurately predicted previous downturns in 1990 and 2008, and he is confident it will hold true again.
Last week, Nationwide announced that house prices were up 3.7% year on year, with average house prices reaching just under £300,000. Despite only modest house price growth being recorded this year, Fred Harrison forecasts a 15% rise in house prices by 2026, followed by a sharp crash around 2027.
While no one can predict exactly when or how bad the crash will be, the core of Harrison’s theory suggests that a downturn is virtually inevitable and he believes it will be a deep fall.
If you are planning to buy or sell property, timing is key. If you are a buyer, it might be worth waiting until after the peak, while sellers could potentially see a good return if they act before the market hits its apex.
Here is everything you need to know about his prediction, why it matters, and what you should do if you are planning to buy or sell.
What is the 18-Year Property Cycle?
Fred Harrison has spent decades studying the UK housing market and is convinced we are nearing the peak of an 18-year property cycle. According to Harrison, since World War II, the UK has experienced a predictable 18-year pattern with the following breakdown:
Following a crash (which last occurred in 2008) it takes about four years for the market to regain momentum and begin its upward trajectory. This is followed by six or seven years of moderate growth in the recovery phase, followed by a mid-cycle dip - a short downturn lasting one or two years. Finally, the market enters the boom phase, lasting another six or seven years, during which prices surge to unprecedented levels.
The underlying force behind rising prices in the property market is the finite supply of land. This then combines with greed and market speculation to turbo-charge sentiment and send prices spiralling before the bubble bursts.
Harrison argues that this cycle is so reliable that it is a fundamental part of the economic landscape — almost like clockwork. He forecasts that house prices are set to peak in 2026, followed by a sharp downturn, likely reaching its worst by 2027.
Is the Property Cycle Still on Track?
Despite the economic disruptions of recent years caused by the COVID-19 pandemic, Harrison believes the cycle is still intact. He thinks the pandemic disrupted the final six or seven years of growth, with house prices effectively seeing large double-digit increases in 2021 and 2022, but recalibrated over 2023 and 2024.
“Property agents talk about house prices having dropped since 2022. The reality is that the COVID-19 pandemic disrupted the economy, including the housing market. With the end of the pandemic, house prices adjusted back onto the 14-year growth path. The drop in prices should be treated as a psychological illusion. Prices are continuing their onward and upward trajectory. If all goes to plan, the fourth cycle ends in 2028, with house prices firming up over the next two years to reach their peak in 2026.”
What is Going to Happen by 2026?
According to Harrison, a two-year 'winner's curse' usually heralds the end of the 14-year property cycle. This is when house prices typically accelerate through double-digit annual increases as people are gripped by 'speculation mania'. However, this time is different thanks to the pandemic property boom.
“We have already banked the double-digit increases thanks to Covid and the generosity of governments pouring trillions of dollars, pounds and euros into economies. The housing market captured much of that money. The traditional mid-cycle downturn, registered by weakening house prices, occurred bang on time, in 2019. Then, Covid became a threat to people's health and wealth in the spring of 2020. Governments poured in the printed money by the summer of 2020, and hey presto, the housing market swallowed that generosity through soaring prices. Increases exceeded 10 per cent annual growth before the slush fund was exhausted…and the housing cycle returned to normal.”
Harrison predicts that by the end of 2026, UK house prices could rise by around 15% from current levels. That means if the average home today costs £292,000, by 2026 it could be worth £335,800. This might sound optimistic, but there are a few reasons why this surge could happen:
Global Economic Trends: Harrison points to global events like Donald Trump’s tax cuts in the US and international financial policies that could fuel investor confidence. This could spill over into the UK housing market, driving prices higher.
Government and Economic Policies: With promises of more UK Government spending (like the £5 billion investment in farming) and an ongoing lack of supply in the housing market, demand will continue to push prices up.
COVID-19 Effects: While the pandemic created an economic shock, Harrison believes it simply accelerated a temporary boom. After a brief period of price drops in 2023 and 2024, prices are now recalibrating and will continue to rise on the path that the 18-year cycle suggests.
One potential wildcard in this scenario is global political instability. Harrison warns that events like a world war (or other major geopolitical crises) could rupture the cycle. But barring catastrophic events, he expects prices to start falling around 2027.
Why a Crash is Coming in 2027
The OBR's latest forecasts suggest house prices will rise steadily up to 2030, without a peak in 2026. This is a forecast that Harrison strongly refutes.
Despite the rosy forecast for the next few years, Harrison is adamant that a crash is inevitable, and it is likely to happen by 2027. According to his theory, this crash will be triggered when house prices have soared to unsustainable levels — as they did in previous cycles. After years of steady growth, the market will hit a tipping point, and the bubble will burst.
“I cannot predict in which quarter the peak will appear. This time, I would not be surprised if the cycle spilled over into spring 2027.”
How will the Crash Affect House Prices?
With debt levels around the world reaching 100% or more of GDP, hardening interest rates, and bankrupt governments, Harrison believes the crash will be worse than previous downturns.
The result will be a significant correction in the housing market, with prices likely falling for several years, potentially dipping by 20-30% or more. For homeowners, this could mean a steep loss in equity, while for first-time buyers, it could present an opportunity to enter the market at a more affordable price.
What Should You Do if You Are Thinking of Buying or Selling?
If you're thinking of buying or selling in the next few years, it is essential to keep Harrison's cycle in mind. Here are a few things to consider:
For Buyers: If you are planning to buy before 2026, keep in mind that prices are likely to rise in the short term. However, if you are buying on a long-term horizon (5-10 years or more), a potential crash could provide a better entry point down the road. If you can afford to wait, it might be worth holding off until after the peak.
For Sellers: If you are thinking of selling in the next couple of years, you could be in a great position. With prices expected to peak in 2026, now may be a good time to cash in on your home’s value before the market turns south.
As always, it’s essential to do your own research before making any major decisions. Keep your eyes on the market and stay prepared for whatever the 18-year cycle has in store.
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