How about a theory of the 18 year property cycle?

Posted on July 25th 2017 / Christina Tobin

 

When is the next best time to invest in a buy-to-let property? How about we look at the past to predict the future? There is this theory called the 18 year property cycle.

 

The 18 year property cycle was developed by the economist Fred Harrison. Harrison was able to successfully predict that housing prices would peak in 2007 in his book Boom Bust: House Prices, Banking and the Depression of 2010. Harrison revealed his theory that housing prices follow an 18 year property cycle, and can be traced back to 200 years of peaks and troughs in land prices.  He also previously predicted the 1989 peak and the 1992 property recession, which coincides with the model. He used his theory of the 18 year cycle to forecast that there are 14 years of stability or growth after a crash, followed by 4 years of recession. The cycle can also be broken up further into components of 7 years of slow, steady growth - then a mid cycle recession occurs, followed by 7 years of rapid growth. After the final two years of the fastest growth, the prices will crash and 4 years of recession will follow straight after.

 

The next question we must ask is: does London follow this model of the 18 year property cycle and where are we in the cycle? London in the past has followed the model of slow growth right after a market crash for several years and then rapid growth for the second half of the cycle. Using Harrison’s model, its arguable that we are possibly due for the next mid cycle dip in 2018. It is hard to predict the exact date, but looking at previous patterns we could predict a wobble in the property market soon. We at Jeremy Jacob Letting Specialists recommend reading Boom Bust: House Prices, Banking and the Depression of 2010 if you are interested to learn more about Fred Harrison’s theories of future property prices and buy-to-let property investing. 

 

 

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Tags: 18 year property cycle Fred Harrison buy-to-let investing


Posted by Christina Tobin
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