Is a global property crash coming in 2027? 'House price prophet' still thinks so

• Fred Harrison successfully predicted the last two property downturns

The house price prophet who predicted the last two downturns says that prices remain on course to peak in 2026, before they crash once again.

Fred Harrison, an author and economic commentator, is expecting house prices to continue rising until late 2026 before the next big property crash occurs.

He is sticking by this prediction despite only modest house price growth being recorded this year.

On a year-on-year basis, Nationwide said that house prices were up 3.7 per cent, with prices still 1 per cent below the all-time peak recorded in summer 2022.

Harrison is famous for his theory of an 18-year economic cycle, and he refuses to accept that the cycle has gone off-course, despite black swan events such as the pandemic.

'Since World War Two, the UK – and the global economy – has passed through three business cycles lasting 18 years,' he told This is Money. 

'These cycles were driven and shaped by a 14-year property cycle. This starts with affordable house prices, passes through a mid-cycle ninth-year downturn in house prices, and then surges on to the peak in house prices at the end of 14 years.

'The cycles are predictable. They adhere to basic economic theory, and I have tested it against historical evidence stretching over centuries. 

'The most recent cycles came in on time, ending in 1974, 1992 and 2010. The OECD's real house price index has tracked this phenomenon since 1970 and the peaks and troughs are visible for all to see.'

What is the 18-year property cycle theory?

The property cycle it is made up of two main phases, according to Harrison. 

After each crash happens, the property market takes about four years to restart its upward trajectory again.

This, he says, is followed by six or seven years of modest growth in what is known as the recovery 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 another six or seven years. 

Harrison thinks the pandemic disrupted the final six or seven years of growth, with house prices effectively seeing double digit increases in 2021 and 2022. 

However, he says prices have now recalibrated over 2023 and 2024 and will continue rising. 

'Property agents talk about house prices having dropped since 2022,' says Harrison. 'The reality is that the Covid pandemic disrupted the economy, including the housing market. 

'With the end of the pandemic, house prices adjusted back onto the 14-year growth path. 

'The drop in prices should be treated as a psychological illusion. Prices are continuing their onwards and upwards trajectory.'

Based on Harrison's cycle we are now nearing the peak.

'If all goes to plan, the fourth cycle ends in 2028, with house prices firming up over the next two years to reach their peak in 2026,' he says.

Harrison's prediction for the next two years comes with one caveat, however.

'The historical evidence shows that a world war can rupture the cycle – that's what happened in the 1930s,' he adds.

'Will Vladimir Putin decide to lob a nuclear bomb on Ukraine? If so, all bets are off for the UK housing market.'

How much will house prices rise by 2026? 

A two-year 'winner's curse' usually heralds the end of the 14-year property cycle, according to Harrison. 

This is when house prices typically accelerate through double digit annual increases as people are gripped by 'speculation mania'. 

However, this time is different, according to Harrison, thanks to the pandemic property boom.

'We have already banked the double-digit increases,' he says. 'Thanks to Covid and the generosity of governments, trillions of dollars, pounds and euros were poured into economies. The housing market captured much of that money.

 Despite the Covid boom, Harrison reckons we could see house prices rise by around 15%

'The traditional mid-cycle downturn, registered by weakening house prices, occurred bang on time, in 2019. Then, Covid became a threat to people's health and wealth in the spring of 2020.

'Governments poured in the printed money by the summer of 2020, and hey presto, the housing market swallowed that generosity through soaring prices. 

'Increases exceeded 10 per cent annual growth before the slush fund was exhausted…and the housing cycle returned to normal.'

Despite the Covid boom, Harrison reckons we could see house prices rise by around 15 per cent between now and the end of 2026.

The average home now sells for £292,000 now based on ONS data. This would mean it could rise to £335,800 by the end of 2026, a rise of £43,800. 

How Trump will drive up house prices in the UK 

Part of the reason for this price rise will be the election of Donald Trump in the US, according to Harrison. 

'Donald Trump's decision to slash tax rates will deliver a bonanza to the American housing market, and elevate expectations across much of the rest of the world, including the UK,' he says. 

'This effect in America is inevitable: the housing market automatically captures the benefits from reductions in the tax-take.

'In the UK, property prices will grow steadily. A 15 per cent rise is my best guess.

'The Starmer government will fail to accelerate house building. Then there's the £5billion which the Government says it will invest in farming over the next two years, which will boost prices across the country. 

'But Starmer's tax on employers will serve as a dampener on the rate of increase of UK prices.

'And bear in mind that the explosive growth in prices having already been banked, during the two-year pandemic episode. The structural needs of the cycle have been met.'

How bad will the crash be?

The OBR's latest forecasts suggest house prices will rise steadily up to 2030, without a peak in 2026.

From 2026 to the end of the forecast period, house price growth is expected to hover at around 2.5 per cent a year. Average house prices in 2028 are expected to reach £310,000. 

This is a forecast that Harrison strongly refutes.

'If you believe the OBR, there will be no savage downturn,' he says. 'But the 18-year business cycle is part of the DNA of the economy. So, provided Putin doesn't do something stupid, house prices will stall in 2026.

'I cannot predict in which quarter the peak will appear. This time, I would not be surprised if the cycle spilled over into spring 2027.'

Harrison has no doubts there will then be a property crash, but won't speculate - at least not yet - on exactly how bad it will be.

'It depends on a number of global events, and the way in which they might interact to amplify the downward escalation,' he says.

'I am currently reviewing historical evidence, to gain an insight into what looms in 2028. The results will be available in the spring.'

Harrison adds: 'Back in 2007, sub-prime mortgages buried in bank vaults were blamed for the financial crisis. Banks were bailed out because they were 'too big to fail'.'

'This time, it will be worse, with global headwinds pushing against house prices. Debt levels around the world are reaching for 100 per cent or more of GDP, and hardening interest rates. 

'By the end of 2026, bankrupt governments will be "too big to fail". But who will bail them out?'