By ED MAGNUS, SENIOR THIS IS MONEY REPORTER
Updated:
The house price prophet who predicted the last two market downturns years before they happened says a new property market crash has already begun.
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crash → update → says
In his latest warning, economist and author Fred Harrison told This is Money he expects house prices to fall by more than 30 per cent over the next four years in a crash that is set to 'eclipse' the financial meltdown of 2008, when average prices fell by 19 per cent.
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prices → tell → cent
House prices could plummet by around £82,000 on average, with the typical property's value dropping from around £273,000 to £191,000, if Harrison's prediction of a 30 per cent correction comes to fruition.
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prediction → plummet → fruition
Since 2021, the economist has been warning the next property crash would begin in 2026 – and he still holds this conviction today.
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he → warn → conviction
While Harrison's views may seem alarmist compared to predictions from major lenders, prices have been falling in recent months.
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prices → seem → months
The average home has fallen by £5,314 since April, according to Nationwide Building Society's latest figures, dropping from £278,880 to £273,566.
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home → fall → 273,566
Harrison has an impressive record of accurately predicting house price crashes.
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Harrison → have → crashes
In his book, The Power in the Land, published in 1983, Harrison correctly forecast that property prices would peak in 1989 and warned of the recession that followed it.
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that → publish → it
Then, in 1997, when he made a ten-year forecast, he predicted a global financial crisis would be triggered after house prices peaked in 2007.
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prices → make → 2007
His warnings played out, as markets went into freefall in 2008.
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markets → play → 2008
He says: 'If my worst fears are realised, I expect average UK house prices will crash by more than 30 per cent over the next four years.
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prices → say → years
Fred Harrison developed the concept of the 18-year property cycle after mapping out hundreds of years' worth of data
'
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Harrison → develop → data
The bottom will be determined by whether people think the Government is offering a realistic strategy for navigating us out of the economic hole into which we are careering,' he says.
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he → determine → which
Harrison is famous for his theory of an 18-year economic cycle, which says that the British economy runs in regular cycles of peaks and troughs.
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economy → say → peaks
Based on the last financial crash – in 2008 – Harrison says the next one is due now.
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one → base → 2008
The economist says he has identified the cycle as operating within the UK for at least 300 years.
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he → say → years
Although the property cycle is not an exact timeline, it is made up of two main phases, according to Harrison.
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it → make → Harrison
After each crash happens, the property market takes about four years to restart its upward trajectory again.
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market → happen → trajectory
This, he says, is followed by six or seven years of modest growth in what is known as the recovery phase.
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what → say → phase
Next, there is a 'mid-cycle dip', often a one or two-year downturn in the market, before another phase of growth ensues, which typically lasts for six or seven years.
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which → be → years
When will the crash happen?
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crash → happen → ?
The market crash has already begun, according to Harrison, who warns that we have now entered a period of 'protracted decline'.
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we → begin → decline
Harrison points out that prices have been falling for some time across London, the South East and South West of England.
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prices → point → England
Indeed, Land Registry data show prices are now lower on average in these regions than they were four years ago.
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they → show → regions
When adjusting for inflation, it means prices across the south have already fallen in real terms by around 20 per cent.
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prices → adjust → cent
He expects house prices to fall in 2027 and keep dropping through 2028, based on his 18-year theory.
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prices → expect → theory
What is unusual about the crash he is predicting this time is that it hasn't been preceded by a house price boom, as was the case prior to 2008.
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case → predict → 2008
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Overall, home values have stagnated in recent years, inching slowly higher, thanks largely to rising prices in the North of England and Scotland.
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values → share → England
The average UK property increased 3 per cent between August 2021 and 2026, rising from £265,000 to £273,000, according to the latest Land Registry figures.
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property → increase → figures
By comparison, prices surged 43 per cent in the four years leading up to the crash in 2008, rising from an average of around £122,000 to £175,000 between August 2003 and 2007.
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prices → surge → August
Harrison says the usual mania this time happened during the pandemic instead of just prior to the crash and that money has flowed into other speculative assets such as technology stocks.
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money → say → stocks
'The crash has already begun in the housing market, but the driving forces are camouflaged by activities across global markets.
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forces → begin → markets
In particular, the AI industry, which is by-and-large a real estate operation, is disguising the trends,' says Harrison.
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Harrison → disguise → trends
'With all that money pouring into the tech corporations, analysts think economies are booming.
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economies → pour → corporations
But those investments are based on almost pure speculation in the future.
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investments → base → future
According to Harrison, the underlying force behind rising prices in the property market is the finite supply of land.
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force → accord → land
'Boom and bust cycles are systemically embedded in the architecture of the economy,' says Harrison.
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Harrison → embed → economy
'Circumstances can change appearances, but there is no disguising the fact that – apart from London – UK regional house prices have not under-performed over the past 14 years.
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prices → change → years
They steadily increased over the housing cycle, and are now faltering.
'
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They → increase → cycle
The housing market’s fate will be revealed when the crazy sums stop pouring into Silicon Valley - which has started.'
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which → reveal → Valley
…and 53 more, not listed.
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