- British author, Fred Harrison, is famous for his 18-year property cycle theory
- He correctly forecast the last two house price crashes years in advance
- Now he is saying prices will rise by around 20% before a major crash in 2026
The house price prophet who predicted the last two property crashes years before they happened has warned of another impending boom and bust on the horizon.
Fred Harrison, a British author and economic commentator famous for his theory of an 18-year property cycle, is predicting turbulent years ahead for the housing market.
Speaking to This is Money, Harrison said house prices are about to boom once more.
He expects the average UK house price to rise by around 20 per cent between now and the end of 2026.
However, Harrison is then expecting a big crash to take place, with any gains made over the next two-and-a-half years wiped out entirely.
He believes Covid-19 caused house prices to rise higher and faster than they would have otherwise done.
That is due to factors such as the 2021 stamp duty land tax holiday inflating property prices, as many sellers simply added extra to the asking price of their homes.
The pandemic also caused a flurry of property transactions as many buyers sought homes they could work from comfortably, or with gardens.
The past year or so of house price dips has merely been a recalibration, Harrison says – and now the housing market is ready to continue its upwards trajectory.
Related Articles
HOW THIS IS MONEY CAN HELP
‘Prices are not dropping,’ says Harrison, ‘they are adjusting back on to the long-term upward trend, after the pandemic induced boom.
‘They will continue to glide upwards to the end of 2026.
‘Between now and then house prices will begin to rocket, and if history repeats itself then the rise will equate to 20 per cent or so above current levels.’
Harrison is expecting politics to provide the fuel to send house prices hurtling higher – both here and in the US.
‘The general elections in the UK, reinforced by the presidential election in the USA, will ensure benign policies for house prices,’ he says.
‘Politicians will do their utmost to accommodate property owners. In the UK, all political parties have fine-tuned their policies so as not to damage the prospect of the coming boom.
‘If Donald Trump wins in November, major tax cuts will quickly follow. Those cuts will be capitalised into home prices.
‘This will help to elevate confidence in global markets, giving a further push to property prices.’
‘As with the financial crisis in 2008, following the peak in 2007, it will end in tears.’
Harrison is also adamant that mortgage rates will likely continue to fall, which will encourage investors, first-time buyers and home movers to push forward with plans.
‘Mortgage rates will go down’
Mortgage rates have broadly been on a downward trajectory since August when rates peaked – and this is a trend that Harrison believes will continue.
He says: ‘Treasuries on both sides of the Atlantic will do their utmost to keep interest rates on a downward trend. That will further reinforce the rise in house prices.’
He adds: ‘A Labour Government would push for an increase in construction, which will persuade people that all is well in the property markets.
‘So more people will take out the forever 40-year mortgages with a growing sense that prices are heading in the right direction. In a rising market people will borrow at whatever interest rate.’
But with every boom, there must eventually come a bust.
Harrison is almost certain that this will come in late 2026 – and the only potential obstacle that could upset his timeline is war.
He says: ‘The crash in house prices is slated for 2026 – subject to no further military adventures in the Middle East and assuming Putin does not provoke Nato in Europe.’
‘President Xi threatens to retake Taiwan in 2027, but house prices will have peaked by then, anyway.’
He believes the next downturn could eclipse any house crash we have seen in the past.
He explains: ‘The economic crash will cause the convergence of the existential crises threatening our globalised society.
‘If my worst fears are realised, there is no telling where the bottom will be in the housing market.’
So should you trust Fred Harrison?
Forecasting future house prices is a difficult business. Many have tried and failed in the past.
But while Harrison’s views may seem far fetched to some people, he does have an uncanny knack for predicting house price crashes.
In his book, The Power in the Land, published in 1983, Harrison correctly forecast property prices would peak in 1989, as well as the recession that followed it.
In 2005, he published Boom Bust: House Prices, Banking and the Depression of 2010, in which he successfully forecast the 2007 peak in house prices and ensuing depression.
According to Harrison, he had already predicted the 2008 crash at least a decade before.
When This is Money spoke to Harrison in 2021 he told us that he warned the then-Labour Government of the 2008 crash in 1997.
Harrison says he has sent a similar message to current Labour leader Keir Starmer, in expectation that Labour will be victorious in the upcoming general election. However, he expects his advice will not be heeded once again.
He adds: ‘I have written to Keir Starmer, to alert him to the prospects. Does he really want Labour to take the blame for another economic crash? Not surprisingly, the response was non-committal.’
‘That was a repeat performance of my attempts to warn Tony Blair and Gordon Brown, when they entered Downing Street in 1997.
‘I wrote to warn them that they had 10 years to ring-fence the UK economy against the crash that would follow the peak in house prices in 2007. They did nothing.’
Some links in this article may be affiliate links. If you click on them we may earn 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 editorial independence.
A new report shows NSW land values fell in 2023 despite house prices rising throughout the year.
Key points:
- Interest rates, construction and inflation are behind land values falling behind
- Meanwhile, house values rose by over 11 per cent in Sydney in 2023
- Researchers predict land value records could tick up again next year
The NSW valuer general, who sets land values for rating and taxing, found an overall decrease of 1.6 per cent in the year to July.
The report attributes the decline to interest rate rises, inflation and increasing construction costs.
However, CoreLogic data shows home values rose 11.1 per cent in Sydney and 2.4 per cent in regional NSW across 2023.
So, how is the discrepancy explained?
It comes down to when the data was captured, according to Chris Martin, a senior research fellow at UNSW’s City Futures Research Centre.
The valuer general’s report straddles the second half of 2022 and the first half of 2023.
“[The report] reflects that there was a decline in the market generally after the RBA started its series of interest rate increases in May 22,” Dr Martin said.
He said it followed a couple years of “very strong” house price growth during the pandemic.
“As it happens, prices have started increasing again through the most recent calendar year, so we’ll probably see in next year’s report higher land values recorded.”
What can property owners expect?
With the valuer general’s figures used to apply council rates, can ratepayers expect any reprieve?
Not unless values fall for a few years in a row, said Shanaka Herath, a senior lecturer housing economics at UTS.
“Usually, the council rates are calculated on a rolling basis, on three averages,” Mr Herath said.
“If we see, for example, land values declining in the next two years, then that will be reflected in lower rates.”
According to the valuer general, all NSW councils are using July 2022 land values for setting rates.
But Mr Herath said the 2023 reduction in land values would be reflected “at least partly” in land tax rates.
“[That is] because we didn’t see any consecutive increase of three years,” he said.
“But it won’t be substantial. To see a substantial reduction in rates, then we will need to see [lower land values recorded] next year, and probably the following as well.”
Property owners are exempt from paying land tax on their primary place of residence, and it only applies to properties where the land value exceeds a certain threshold (currently $1,075,000).
Dr Martin said most NSW landlords do not pay land tax.
“It’s about one in six,” he said.
Mr Herath said people should not get too excited about land values reducing for just one year because values are cyclical.
“If you look at the five-year, 10-year average, those will certainly tell us that there’s a significant upward trend,” he said.
Loading…
If you’re unable to load the form, click here.