The housing price prophet who predicted the last two downturns predicts prices will continue to peak in 2026, before falling again.
Fred Harrison, author and economic commentator house prices are expected to continue rising until the end of 2026 before the next big property crash.
He is sticking to this forecast despite the modest increase in home prices recorded this year.
On a year-over-year basis, Nationwide said house prices have increased 3.7 percent, and prices are 1 percent below the all-time peak recorded in summer 2022.
Harrison is famous for his theory of the 18-year economic cycle, and he refuses to accept that the cycle has failed, despite black-card events such as epidemics.
‘Since the Second World War, the UK – and the global economy – has gone through three business cycles over 18 years,’ he told This Is Money.
‘These changes were driven and shaped by the 14-year wealth cycle. This starts with home prices rising, going through a nine-year median decline in home prices, and then rising to a 14-year peak in home prices.
‘Changes are predictable. They adhere to basic economic theory, and I have tested it against historical evidence over the centuries.
‘The latest changes came over time, ending in 1974, 1992 and 2010. The OECD’s real house price index has tracked this trend since 1970, and shows the peaks and vehicles for all to see.’
What is the 18 year asset turnover concept?
The property change has two main components, according to Harrison.
After each crash, the property market takes four years to resume its upward trajectory.
This, he says, will be followed by six or seven years of low growth in what is known as the recovery phase.
Then, there is a mid-cycle downturn, often one or two years of market decline, before another phase of growth begins, lasting for six or seven years. same year.
Harrison expects the pandemic to disrupt six or seven years of growth, with house prices likely to see double-digit growth in 2021 and 2022.
However, he says prices have changed again for 2023 and 2024 and will continue to increase.
Fred Harrison developed the concept of the 18-year wealth cycle after mapping hundreds of years of data
‘Property agents are talking about falling house prices from 2022,’ says Harrison. ‘The reality is that the Covid pandemic has disrupted the economy, including the housing market.
‘With the end of the pandemic, house prices are back on a 14-year growth path.
‘The drop in prices should be considered a psychological illusion. The prices just keep going up and up.’
On the Harrison cycle we are nearing the top.
‘If all goes to plan, the fourth cycle will end in 2028, with house prices rising over the next two years and peaking in 2026,’ ‘ he said.
Harrison’s forecast for the next two years comes with one caveat.
‘Historical evidence shows that a world war can break the cycle – this is what happened in the 1930s,’ he added.
‘Will Vladimir Putin decide to drop a nuclear bomb on Ukraine? If so, all bets are off for the UK housing market.’
How much will wages rise in 2026?
A two-year ‘winner’s curse’ marks the end of a 14-year wealth cycle, according to Harrison.
This is the time when house prices accelerate through double-digit increases every year as people experience the ‘ideal plateau’.
However, this time is different, according to Harrison, thanks to the resources of the epidemic.
‘We’ve banked double-digit inflation,’ he said. ‘Thanks to Covid and the generosity of governments, millions of dollars, pounds and euros have been poured into the economy. The housing market took most of that money.
Despite the severity of Covid, Harrison says we will see house prices rise by 15%
‘The decline in the middle of the old cycle, registered by the weakness of housing prices, occurred in time, in 2019. So, Covid becomes a threat to the health and wealth of the people in the spring of 2020.
‘Governments poured in printed money in the summer of 2020, and hey presto, the housing market swallowed that blessing through rising prices.
‘Inflation was over 10 per cent the year before the slush fund ran out…and the housing cycle resumed.’
Despite the severity of Covid, Harrison says we could see house prices rise by 15 percent between now and the end of 2026.
The average home now sells for £292,000 according to ONS data. This means it will reach £335,800 by the end of 2026, an increase of £43,800.
How Trump will drive down house prices in the UK
One of the reasons for this price increase is the election of Donald Trump in America, according to Harrison.
“Donald Trump’s decision to lower tax rates will have a positive impact on the US housing market, raising expectations across much of the world, including the UK,” it said. each.
‘This impact on America is unavoidable: the housing market will automatically capture the benefits from the tax cuts.
In the UK, property prices continue to grow. A 15 percent increase is my best guess.
‘The Starmer government is failing to accelerate house building. There’s just £5 billion the Government says it will invest in farming over the next two years, boosting prices across the country.
‘But Starmer’s tax on employers is set to reduce UK wage growth.
And keep in mind that inflation is already in the bank, in a two-year recession. The structural needs of the change have been met.’
The winner’s curse: Harrison thinks home prices will increase by 15% before peaking in late 2026. But then he thinks the market will crash soon after.
How bad will the crash be?
The The OBR’s latest forecasts suggest that house prices will continue to rise through 2030, with no peak in 2026.
From 2026 to the end of the forecast period, house price growth is expected to reach 2.5 percent annually. House prices in 2028 will reach £310,000.
This is a prediction that Harrison strongly opposes.
‘If you believe the OBR, there is no negative impact,’ he said. ‘But the 18-year business cycle is part of the economy’s DNA. So, if Putin doesn’t do something stupid, the house prices will stop in 2026.
‘I cannot predict which quarter the peak will occur. At this point, I wouldn’t be surprised if the cycle breaks by spring 2027.’
Harrison doesn’t doubt there will be a crash, but he doesn’t think – at least not yet – about the worst.
‘It depends on the number of international events and how they can interact to increase the bottom line,’ he said.
‘I am currently reviewing the historical evidence to see what will happen in 2028. The results will be available in the spring.’
Harrison added: ‘In 2007, sub-prime mortgages buried in bank accounts were blamed for the financial crisis. Banks were sent out because they were ‘too big to fail’.
‘This time, it will get worse, with global winds pushing up house prices. Debt levels around the world are reaching 100 percent or more of GDP, and interest rates.
‘By the end of 2026, bankrupt governments will be “too big to fail”. But who will save them?’
Some links in this article are affiliate links. If you click, we may receive a small commission. That helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our privacy.
