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The 18 Year Property Cycle: Why The UK Housing Market Has Not Crashed Yet

A Tale of Two Narratives

In 2020, the COVID-19 pandemic plunged the world into uncharted territory, sparking a flurry of negative predictions regarding the fate of the housing market.

The COVID-19 pandemic was followed by war in Europe, rising fuel prices leading to high inflation, and interest rates increasing from sub-1% levels to over 5%, all of which resulted in a cost of living crisis. Echoing the sentiments of conventional economic wisdom, experts again predicted a catastrophic collapse in house prices.

But what has really happened to UK house prices throughout this tumulus period?

Conventional economic wisdom dictates that an economic downturn would inevitably lead to a decline in house prices. Yet, as the dust settled and the economy grappled with the aftershocks of COVID-19, war, escalating interest rates and a cost of living crisis, a curious phenomenon emerged: the UK housing market hasn't succumbed to the anticipated crash and still remains resilient…but why?

The Myth of Economic Convention

At the heart of this conundrum lies a fundamental misconception perpetuated by traditional economic theory: the belief that a weak economy invariably results in declining house prices. History, however, tells a different story. The aftermath of the 2008 financial crisis serves as a poignant example of the disconnect between economic conditions and housing market performance. Despite initial setbacks, house prices experienced a robust recovery, confounding expectations and challenging long-held assumptions.

The Conventional Wisdom: House Price to Income Ratio

Experts argue that the house price to income ratio (Average house price ÷ Average income of buyers) is the golden ticket to understanding whether the property market is in a bubble. The traditional narrative suggests that the ratio's surge implies an impending crash as prices are expected to revert to historical averages.

Let's challenge this notion; the property-owning landscape has changed significantly over the years. The rise of dual-income households, longer mortgage terms, and family support for first-time buyers are reshaping the game today. Perhaps the conventional wisdom is due for revision….

The 18 Year Property Cycle Theory

Developed by Fred Harrison, Executive Director of the Land Research Trust, the 18 Year Property Cycle Theory has proven to be a remarkable tool for predicting major market events. With a track record of accurately forecasting the property crashes of 1990 and 2008, Harrison now predicts the UK will suffer its next major house price crash in 2026.

In his groundbreaking 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.

In his latest publication, 'We Are Rent', Harrison boldly predicts that house prices will next peak in 2026, followed by a recession that will surpass the events of 2008.

According to Harrison, the market follows a specific pattern. After a crash, 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.

Causes of House Price Rises


Harrison identifies the finite supply of land as the underlying force driving the rise in property prices. As populations and economies grow, the demand for housing increases, forcing prices up. Limited land availability exacerbates this trend, prompting banks to lend more against escalating asset values, further fueling the upward spiral. Additionally, the perception of property as a safe haven and a reliable investment vehicle amplifies the allure of capital gains, propelling prices even higher.


Causes of House Price Crashes


When addressing concerns about potential catalysts for a crash such as the COVID-19 pandemic, the war in Europe, or the cost of living crisis, Harrison asserts that these factors have not disrupted the structural integrity of the cycle system. However, he acknowledges that an escalation of the war in Europe or a Chinese invasion of Taiwan could potentially disrupt the system.


Furthermore, Harrison believes that the current labour shortage and the government elections in 2024 in both the UK and the USA will reinforce the growth of property prices, as no political party, before or after the elections, would allow a house price crash.


“Each 18-year cycle has a mid-cycle downturn, for the current cycle, this was 2019. The overall trend from here is up and up – squeezing purchasing power till the music stops in 2026. House prices will peak in 2026 followed by a recession that will eclipse what happened in 2008. When prices become insupportable, with disposable incomes crushed by mortgage liabilities, people retract on consumption; as the housing market freezes, enterprises find the demand for their goods and services beginning to disappear, and hey presto, we have a recession”.




Fred Harrison's 18-year property cycle theory has proven its predictive power, accurately anticipating past property crashes and recessions. With his latest forecast pointing towards a major house price crash in 2026, based on historical data and underlying economic forces, the question is simple: Which economic theory will you believe….?



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