Fred Harrison, a British author and economic commentator, has gained recognition for his accurate predictions of housing market crashes.
His predictions for both the property crashes in the early 1990s and the 2008 financial crisis turned out to be remarkably accurate.
Drawing on historical data spanning centuries, Harrison developed the theory of an 18-year property cycle, suggesting that a pattern of property price fluctuations repeats itself with a major downturn occurring every 18 years.
When interviewed in June 2021, Harrison forecasted that the next crash would take place in 2026.
In light of the recent surge in inflation and high mortgage rates, there is now speculation about whether this cycle has been disrupted.
The Phases of the 18-Year Cycle
Harrison’s 18-year cycle comprises distinct phases that follow each housing market crash.
The cycle commences with a four-year period of the market restarting its upward trajectory, followed by six or seven years of modest growth known as the ‘recovery phase.’
Subsequently, a mid-cycle dip, often lasting one or two years, occurs before the final boom phase emerges.
This final boom phase typically spans six to seven years and sees the most substantial growth in prices.
Harrison’s theory is rooted in extensive analysis of data from countries including the US, UK, Australia, and Japan.
His accurate forecasts in his books “The Power in the Land” (1983) and “Boom Bust: House Prices, Banking and the Depression of 2010” (2005) underscore the validity of his methodology.
2026 Crash Prediction and Current Market Trends
When Harrison was interviewed in June 2021, he predicted another peak in house prices in 2026, followed by a recession surpassing the 2008 crisis.
The 18-year cycle appeared to be unfolding as anticipated until the end of the previous year, with a significant increase in average house prices during the final boom phase.
However, a swift rise in interest rates by the Bank of England led to a quick downturn in average house prices.
Nationwide’s index reported a 3.8% decrease, while Halifax recorded a 2.4% year-on-year decline in prices.
Harrison views this as a temporary deviation and expects prices to resume an upward trajectory, propelled by factors such as the exit from the pandemic and political events.
Factors Influencing Future Trends
Harrison’s analysis incorporates various factors that will likely impact future housing market trends.
He believes that the UK and US general elections in late 2024 and early 2025 will drive increased money flow and policies to support voters, resulting in rising land values until 2026.
Furthermore, Harrison argues that a backdrop of higher inflation will elevate property’s appeal as a safe haven asset, reinforcing the 18-year cycle.
Contrary to conventional wisdom, he suggests that increased landlord selling could contribute to higher house prices, as reduced supply may lead to higher rents and drive tenants towards homeownership.
The Uncertain Future and Potential Disruptions
Harrison stands firm in his prediction that the 18-year cycle will lead to a crash in 2026.
However, he acknowledges the potential for disruptions to this cycle.
He suggests that short of a world war, dramatic events are required to alter the trajectory of the economy as embedded forces drive the housing market.
He cites instances like tax-funded incentives for first-time buyers that have temporarily impacted trends but emphasizes that governments cannot halt the overarching house price trend under current property rights and tax policies.