The 18-Year Property Cycle in 2025: Boom or Crash
- Gradragstoriches
- Jul 29
- 5 min read
Updated: Aug 3
Is a UK Property Crash Inevitable?
According to Rightmove, asking prices for property have dipped in Quarter 3 of 2025, meaning they’ve now cut their annual forecast for price growth to just 2%. Rightmove blames the 1.2% fall in prices on the end of stamp duty discounts and more homes coming on to the market: there are more homes for sale than at any point in the last decade.
This recent shift in the housing market has sparked debate: is the 18-year property cycle a reliable indicator, or have unprecedented events finally broken its long-standing pattern?
The 18-Year Property Cycle Explained
The 18-year property cycle is a theory championed by economist Fred Harrison, who suggests that property prices follow a predictable pattern of growth and decline, culminating in a significant crash. Historically, this cycle has been divided into phases: a four-year recovery, followed by six or seven years of modest growth, a brief one or two-year mid-cycle dip, and then another six or seven years of aggressive growth, with the final two years known as the 'Winner's Curse'.
In his book, 'The Power in the Land' (1983), Harrison correctly predicted the peak in property prices in 1989, as well as the subsequent recession. Building on this success, his book 'Boom Bust: House Prices, Banking and the Depression of 2010' (2005), accurately forecasted the 2007 peak in house prices and the ensuing depression.
As outlined in the post “The 18-Year Property Cycle Predicts a 2027 Housing Crash”, Fred Harrison is convinced we are nearing the peak of the cycle known as the “winner’s curse”.
At Grad Rags to Riches, we have been tracking the 18-year property cycle and have 6 posts dedicated to this theory. So, if this is a new concept to you, go and hunt these down, starting with this one.
MoneyWeek's Bear Case: Signs of a Potential Property Crash (and the Counter-Arguments)
In a recent edition of MoneyWeek, four critical factors were outlined that they believe are driving an impending house price crash:
• Weak Economy: A stagnant, potentially recession-bound economy with job cuts means fewer people can afford new homes.
(The counter argument: wage growth over recent years has been good at 5.6%, improving home affordability. Also, the GRTR blog "The rich get richer" advocates that wealth concentration will still support demand and increasing prices.)
• Small Landlords & Second-Home Owners Quitting: Increased taxes and regulations are pushing small landlords and second-home owners to sell, flooding the market with supply.
(The counter argument: private investment and institutional investors are massively increasing their exposure in rental property, potentially absorbing some of this supply.)
• Rising Taxes & Levies: Increasing council tax, restored stamp duty, and higher energy/water bills are choking off demand as affordability shrinks.
(The counter argument: easier access to mortgages and other governmental help will negate some of this pressure, potentially cushioning the impact on demand.)
• Looming Fiscal Crisis: The UK's spiralling government deficit and high bond yields could force the Bank of England to hike interest rates, triggering a full-scale price collapse.
(The counter argument: markets are forecasting two interest rate cuts later this year, meaning the outlook for the housing market in the second half of the year remains positive.)
Global Turmoil: Are We in Uncharted Territory?
Recent years have presented a barrage of challenges that have led many to question the cycle's resilience. The COVID-19 pandemic, ongoing regionalised wars, and a period of higher interest rates have caused significant market volatility.
Critics argue that these disruptions have fundamentally altered market dynamics, making the theory less predictable. Some point to the fact that real-term property prices have shown little growth since 2012. The Nationwide House Real Price Index adjusted for inflation shows that the current average price of a home today is exactly where it was in 2004 (See ‘The 18-Year Property Cycle is Broken’).
The fact that Rightmove has now cut its annual forecast for price growth to 2% in 2025 shows little optimism for ‘The Winner's Curse’.
Signs of a Potential Property Boom
However, the big financial news this month was that Chancellor Rachel Reeves is planning to allow banks to offer mortgages up to six times a borrower's salary. For a couple on a combined £80,000, this means potential borrowing would rise from £360,000 to £480,000.
Understandably, there are some deep concerns about the impact of allowing a pair of near-average earners to take on an extra £120,000 of mortgage debt.
An article published in ‘Money Mail’ highlights how today's moves mirror a similar situation 18 years ago, just before the 2008 property crash. It was 2006, and Abbey, the UK’s second biggest mortgage lender, had decided home buyers should be allowed to borrow up to five times their joint salary. The early 2000s property market boom was about to hit its peak, and an Abbey spokesman said: ‘Lending five times salary may sound high, but really is something we have to do given what is happening with house prices.' Abbey wasn’t alone - other banks and building societies, including RBS and Cheltenham & Gloucester, were also offering supersized loans.
You don’t need to be an economic genius to work out that if you lend people more money to buy homes, the price of homes will rise. Yet stretching mortgage debt to this extent increases the risk of financial overextension for borrowers, especially with fluctuating interest rates and unexpected home running costs. This move, designed to help buyers, could ironically contribute to a future crash.
House Building Failure
The UK does not build nearly enough homes, especially given the rapid rise in the total population. So the existing ones keep getting more expensive.
The Construction Industry Training Board (CITB) suggests that achieving the ambitious target of 1.5 million new homes set by the Government would require a significant and unprecedented expansion of the workforce. CITB estimates that an additional 161,000 people need to enter the construction workforce to meet the government's 1.5 million homes target. This includes a substantial number of specialised roles like bricklayers, groundworkers, carpenters, plasterers, plumbers, electricians, and roofers – an unlikely scenario.
Is the 18-Year Property Cycle Broken?
Despite the conflicting signals, Fred Harrison is confident that the long-term fundamentals of the 18-year property cycle haven’t been erased. Harrison believes the cycle has simply shifted in 2025.
The UK market is emerging from a correction phase and is now in the recovery phase, soon to enter the winners' curse. This is a critical moment, and in high-yield areas like Leeds and Sheffield, demand is rising again, prices are stabilising, and investor confidence is returning.
Harrison, having predicted the 1989 and 2008 crashes years in advance, still believes the cycle is working. He forecasts a significant rise in prices before a major crash around 2027. He attributes recent dips to a necessary recalibration and anticipates mortgage rates will continue to fall, stimulating further market activity.
It should be noted that mortgage rate expectations have not been achieved so far this year, but markets are currently forecasting two more Bank Rate cuts this year, which would help to further stimulate activity.
This perspective is bolstered by recent news, such as lenders being allowed to offer first-time buyers the opportunity to borrow up to six times their income, and substantial investor funding being committed to the build-to-rent sector, all of which could fuel a potential boom.
The Verdict: When Will House Prices Fall in the UK Market?
LATEST NEWS: Nationwide's latest House Price Index showed house prices increased by 0.6% in July, following a 0.9% fall in June.
The current landscape of the UK property market in 2025 presents a truly conflicting story. While external pressures and new lending policies introduce variables, the underlying patterns of the 18-year property cycle continue to exert their influence, suggesting a complex interplay between immediate market responses and long-term economic forces. Whether the cycle holds true to its historical predictions, leading to a crash around 2027, or if this time truly is different, remains a question at the forefront of every investor's and homeowner's mind.
