The 18-Year Property Cycle: How Tariffs and War Could Lead to the 2027 Housing Crash

Tariffs, wars, and economic upheaval seem to dominate every headline, leaving us all wondering: What is really going on? Today, we will explore the impact of these forces on the 18-year property cycle.

The 18-Year Property Cycle

At Grad Rags to Riches, we have been tracking the 18-year property cycle and have 5 posts dedicated to this theory. So, if this is a new concept to you, go and hunt these down, starting with this one.

As discussed in the post “The 18-Year Property Cycle Predicts a 2027 Housing Crash”, we are nearing the peak of the cycle. This phase, known as the “winner’s curse” or ‘mania phase’ is marked by:

• Excessive speculation

• Banking deregulation

• Easy credit and excessive debt

• Reckless monetary policies

This is precisely where we find ourselves today. Trump’s tariffs, war, and economic upheaval will intensify this speculative environment, distorting markets and encouraging reckless investments in land and property. This will fuel the mania that precedes the predicted bust around 2027.

The term “winner’s curse” refers to buyers who "win" by securing property at inflated prices, only to regret it later when the market corrects.

The Trouble with Tariffs

Are you tired of hearing the “T” word? You know the one- tariffs!

For a while now, tariffs have been at the forefront of economic discussions, especially with US trade policies under President Trump.

Why is Trump so intent on imposing tariffs?

The reason? Because, according to him, it’s beautiful. Yep, you read that right. Trump has said that the word “tariff” is the most beautiful word in the dictionary.

"This country has been ripped off by every nation in the world, every company outside the world. We've been ripped off at levels never seen before," Trump said in a recent Fox News interview. "And all we're going to do is get it back. We're going to get a lot of it back."

Trump sees tariffs as a tool to force better trade deals for the U.S. He believes that by imposing tariffs on foreign goods, the U.S. can demand fairness from other nations and bring industrial activity back into the U.S. To Trump, tariffs are the key to “getting back” what America has lost.

However, the reality is that tariffs do not lead to higher wages or improved living standards. Instead, they increase the prices of both foreign and domestic goods, causing inflation and rises in the costs of living. Consumers end up paying more for everyday items, but their wages stay the same.

Whether we like it or not, tariffs will shape the economic landscape in profound ways. So, how do they impact the 18-year property cycle?

Henry George and the Economics of Tariffs

If you are unfamiliar with Henry George, a 19th-century economist, it is time to pay attention. His ideas can help us understand why tariffs affect the 18-year property cycle.

George argued that tariffs concentrate wealth in the hands of monopolists, oligopolies, and large wealthy landowners. When tariffs raise the price of imported goods, domestic producers, freed from international competition, can raise their prices too. The result? Consumers pay more, and wages don’t keep up.

Instead of benefiting workers, the profits generated by tariffs flow into land rents and asset values, enriching the already wealthy. In other words, the rich get richer and the poor get poorer.

For these rich individuals, the prospect of rising asset prices presents an opportunity too good to pass up. Armed with unprecedented levels of cash liquidity and financial firepower, they eagerly snapped up assets, including houses, driving prices ever higher.

It’s Not Just America

If you think that because you are not in the U.S. tariffs don’t affect you, think again, we are seeing retaliatory tariffs worldwide. As countries engage in this “tit-for-tat” tariff war, it leads to:

• Increased cost of living

• Decreased wages

• Higher home prices

In the end, a global trade war leaves workers worse off. According to Henry George, the best course of action is to embrace free trade and avoid tariffs altogether. Free trade increases competition, which drives down prices and boosts efficiency. Unfortunately, free trade isn’t on the agenda for President Trump.

The 18-Year Property Cycle and the Risk of War

Source – Financial Times

As we approach the 18-year property cycle's predicted peak, we are seeing heightened geopolitical tensions and increased military spending. This echoes the cycle's historical tendency to coincide with periods of war or societal upheaval.

The winner’s curse phase of the property cycle is characterised by rising property prices, increased lending, and an encouragement to over-leverage. It is when the most money is printed by Governments, and speculation is rampant.

Germany’s massive defence spending increase, enabled by constitutional changes, is a stark example of this trend. A plan to inject up to €1 trillion into defence and infrastructure programs is in motion. Even more importantly, Germany's government has decided to pass constitutional changes once thought impossible.

Other countries, including the UK, are also investing huge sums in defence and infrastructure, which could lead to even more inflationary pressures and rising housing prices.

Source – Financial Times

Banking Deregulation

President Trump is also loosening banking regulations, adding further fuel to the fire. Deregulation can act as a powerful catalyst in the final phase of the 18-year cycle. Lower lending standards make it easier for people to borrow and leverage money for property investments which in turn fuels demand and drives up prices, creating the "mania" phase we've been discussing.

Just think back to the 2000s when the deregulation of the financial sector played a significant role in the real estate bubble that led to the 2007 peak. It amplified the boom, and as we all know, it also amplified the subsequent bust.

Tax Cuts for the Rich

Some believe this whole charade is not about ‘Making America Great Again’ at all; rather it is about personal enrichment for President Trump, his family, and his billionaire friends.

Trump says he is increasing tariffs to fund tax cuts for the American people. But, if you reduce income tax or capital gains tax across the board, who benefits the most? Those with the biggest incomes or the most assets.

When Trump loosens banking regulations enabling easier, cheaper and riskier credit, enabling banks to create more money, where does a significant portion of that money end up? You guessed it – increased asset and property prices, making the rich even richer while the middle class and poor are further squeezed by slow wage growth and increased cost of living.

Help to Buy Schemes

At this late stage of the 18-year property cycle, there are some things you can absolutely bet on occurring. One of them is governments generating increasingly easier access to credit and much looser regulations. The other is governments providing schemes to help young and new buyers get on the property ladder to "address the housing crisis".

In the UK, the 'Shared Ownership Scheme' is designed to help buyers purchase a share of a property, typically between 10% and 75%, and pay rent to a housing association on the remaining share. This lowers the initial deposit and mortgage requirements, making homeownership more accessible.

However, in the context of the "winner's curse", schemes like Shared Ownership can further stimulate demand, exacerbating house price inflation.

Properties offered with this inducement of affordability may well be sold at exaggerated prices - as new build homes are. If, or when, house prices fall, buyers may find themselves with serious negative equity.

2027: The Looming Reckoning

The 18-year property cycle points towards a mania phase followed by a significant housing market crash around 2027.

The Winners Curse is characterised by a period of unsustainable asset price inflation, fuelled by speculation and easy credit. By distorting markets and encouraging speculative investments, Trump's tariffs, war, and economic upheaval, are all contributing to this.

The cycle's subsequent bust is marked by a sharp decline in asset prices, a credit crunch, and a deep recession. Again, the combination of tariffs, war, and excessive monetary policies is creating the perfect storm for this downturn.

Conclusion: Prepare for the Challenges Ahead

As we approach the peak of the 18-year property cycle, it is clear that global factors will likely impact housing prices, cost of living, and economic stability.

The best strategy? Stay informed, remain vigilant, and prepare for the possible mania and subsequent downturn that history suggests is coming. The 18-year cycle is unfolding, and the 2027 reckoning is fast approaching!