The housing market commentator, Fred Harrison, who accurately predicted the last two property downturns, maintains that house prices are still on track to peak in 2026 before experiencing another major crash.
Harrison, an author and economic analyst, anticipates that property values will continue to climb steadily until late 2026, when he expects the next significant downturn to occur.
Despite modest house price growth this year, Harrison remains committed to his forecast. According to Nationwide, house prices have risen 3.7 per cent year-on-year, although they remain 1 per cent below their record high set in summer 2022.
Harrison’s confidence stems from his well-known theory of an 18-year economic cycle. He believes this pattern remains intact, even in the face of unexpected disruptions like the pandemic.
Fred Harrison, a well-known economic commentator, recently explained how the UK and global economies have followed a consistent pattern of 18-year business cycles since World War Two. Speaking to This is Money, he highlighted how these cycles have been shaped by a 14-year property market trend.
According to Harrison, this property cycle begins with affordable house prices, followed by a mid-cycle dip in the ninth year. From there, the market rebounds and accelerates towards a peak in property prices at the 14-year mark.
Harrison firmly believes these cycles are highly predictable, grounded in basic economic theory and supported by centuries of historical evidence. He points to the accuracy of this pattern, with recent cycles concluding in 1974, 1992, and 2010.
The OECD’s real house price index, which has tracked property trends since 1970 for global economies, also reflects these cycles clearly, showcasing the peaks and troughs that align with Harrison’s predictions.
What is the 18-year property cycle theory?
Fred Harrison outlines the property cycle as consisting of two distinct phases. After a market crash, it typically takes around four years for the property market to begin its upward trajectory again.
This initial phase is known as the recovery phase, during which modest growth occurs over a period of six to seven years. Following this, a mid-cycle dip usually takes place – a brief downturn in the market lasting one to two years – before the second phase of growth begins. This final phase typically continues for another six to seven years.
According to Harrison, the pandemic caused a disruption to the final phase of growth, as house prices surged significantly, recording double-digit increases in both 2021 and 2022.
However, he believes prices have now stabilised and recalibrated throughout 2023 and 2024. Moving forward, Harrison predicts that house prices will resume their upward climb in the coming years.
Fred Harrison argues that recent drops in house prices are not as significant as they appear. He explains that the Covid pandemic disrupted the economy, including the housing market, causing a temporary deviation.
“Property agents talk about house prices having dropped since 2022,” says Harrison. “The reality is that the pandemic disrupted the economy, and house prices have since adjusted back onto their 14-year growth path.” He describes the perceived price drop as a psychological illusion, suggesting that prices are, in fact, continuing their upward trajectory.
According to Harrison’s property cycle theory, we are now approaching 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 predicts.
However, Harrison’s outlook comes with a notable caveat. He warns that external global events could still disrupt the cycle. “The historical evidence shows that a world war can rupture the cycle – that’s what happened in the 1930s,” he adds.
Harrison highlights the geopolitical uncertainty caused by Russia’s actions in Ukraine. “Will Vladimir Putin decide to lob a nuclear bomb on Ukraine? If so, all bets are off for the UK housing market,” he cautions.
How much will house prices rise by 2026?
Fred Harrison believes that the end of the 14-year property cycle is often marked by a two-year ‘winner’s curse’. During this period, house prices tend to surge with double-digit annual increases as buyers get swept up in speculative mania. However, Harrison argues that this cycle is slightly different due to the impact of the pandemic property boom.
“We have already banked the double-digit increases,” he explains. According to Harrison, the pandemic prompted governments worldwide to inject trillions of dollars, pounds, and euros into their economies. Much of this stimulus was absorbed by the housing market, pushing prices upward.
He points out that the traditional mid-cycle downturn, which typically sees house prices weaken, occurred on schedule in 2019. By early 2020, the onset of Covid posed a major threat to both health and economic stability. Governments responded with significant monetary support by mid-2020, leading to an unexpected property boom. “The housing market swallowed that generosity through soaring prices,” Harrison says, noting that annual growth exceeded 10 per cent before the stimulus was depleted, after which the housing cycle returned to its usual rhythm.
Despite the pandemic-driven surge, Harrison predicts further house price increases over the next few years. He estimates that prices could rise by around 15 per cent between now and the end of 2026.
With the average UK home currently selling for £292,000, based on the latest data from the Office for National Statistics (ONS), this could mean prices reaching approximately £335,800 by late 2026 – an increase of £43,800.
How Trump will drive up house prices in the UK
Fred Harrison believes that one factor driving the predicted rise in property prices will be Donald Trump’s return to power in the United States.
Harrison explains that Trump’s decision to cut tax rates will deliver significant benefits to the American housing market, which will, in turn, influence expectations globally, including in the UK. “The housing market automatically captures the benefits from reductions in the tax-take,” he states.
While the UK won’t experience the same level of dramatic growth, Harrison predicts steady price increases. “A 15 per cent rise is my best guess,” he says, highlighting factors that will contribute to this trend.
He points to the Starmer government’s inability to accelerate housebuilding as a key reason why supply constraints will persist, putting upward pressure on prices. Additionally, the £5 billion investment pledged by the government to support farming over the next two years is expected to further boost property prices in rural areas.
However, Harrison warns that the Labour government’s proposed tax on employers could slow the rate of growth by acting as a drag on economic activity.
He also notes that much of the explosive price growth was already “banked” during the pandemic. The two-year boom saw unprecedented increases, meaning the structural requirements of the property cycle have already been fulfilled.
How bad will the crash be?
The Office for Budget Responsibility (OBR) recently forecasted that UK house prices will rise steadily until 2030, dismissing the idea of a peak in 2026. According to their projections, annual house price growth will stabilise at around 2.5 per cent, with average prices reaching £310,000 by 2028.
However, this outlook is strongly disputed by Fred Harrison. “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.”
Harrison believes the peak of the current property cycle will still arrive, though the timing could vary. “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,” he adds.
While he is confident there will be a property crash, Harrison refrains from speculating just yet on the scale of the downturn. He explains that much depends on global events and how they interact to accelerate the economic decline. “I am currently reviewing historical evidence, to gain an insight into what looms in 2028. The results will be available in the spring,” he reveals.
Reflecting on the 2008 financial crisis, Harrison recalls how sub-prime mortgages and failing banks sparked global chaos. Banks were bailed out because they were deemed “too big to fail.” This time, however, he predicts the situation will be far worse.
“Global headwinds will push against house prices, with debt levels worldwide approaching or exceeding 100 per cent of GDP and interest rates remaining firm,” Harrison warns. He argues that by the end of 2026, it will not be banks but “bankrupt governments” that become “too big to fail.” Harrison then poses a crucial question: “But who will bail them out?”
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