Explosive warning from Britain’s house price Nostradamus. Economist FRED HARRISON pinpointed the past two crashes. Now he reveals exactly when the next is coming, how far they’ll fall – and what to do

The house price prophet who predicted the last two market downturns years before they happened has sounded the alarm over a looming property crash – which he warns will be the worst in a generation.

In an explosive warning, economist and author Fred Harrison tells This is Money he expects house prices to peak in 2026 before plunging into a ‘ginormous crash’ in 2027 and 2028.

More than 20 per cent could be wiped from the value of homes across the UK in the next few years, the economist predicts, in a crash that is set to ‘eclipse’ the financial meltdown of 2008.

In his 2005 book Boom Bust: House Prices, Banking and the Depression of 2010, Harrison successfully predicted that house prices would peak in 2007 and crash in 2008.

According to the author, he had already predicted the 2008 crash at least a decade before and had sent Tony Blair’s Labour government warnings of what was about to happen.

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. Based on the last financial crash – in 2008 and 2009 – Harrison says the next is now due.

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

‘The cycles are predictable. They adhere to basic economic theory, and I have tested it against historical evidence stretching over centuries. The last cycle has not gone off course, despite black swan events such as the Covid pandemic in 2020.’

When will the market crash?

Based on his 18-year theory, Harrison expects the next crash to happen in 2027 and last through 2028. House prices may nudge higher and hit a peak in 2026 before they begin to plummet the following year, he says.

After that, he anticipates they will flatline. The so-called ‘property prophet’ adds: ‘I expect house prices to flatline for years thereafter and no one can predict what, and when, that trend will be reversed.’

The looming crash will eclipse anything most people have experienced in their lifetimes, he adds.

‘The downturn between 2027 and 2028 will mark the end of the current 18-year business cycle,’ he explains.

‘This is the fourth 18-year cycle since 1944, but the first one to face multiple threats that eclipse the “banks too big to fail” crisis in 2008. These threats include a risk of Russian warmongering, an AI tech market bubble, global warming and a crisis of mass migration.

‘This time, it will be a “banks are too big to fail” crisis, with no-one to bail them out.’

Harrison has successfully predicted the past two housing market crashes. In his book, The Power in the Land, published in 1983, Harrison, correctly forecast property prices would peak in 1989, and warned about the recession that followed it.

How much could house prices fall by?

During the 2008 financial crisis average house prices fell by almost 19 per cent, from £175,000 to £142,000.

Since then, prices have risen 91 per cent to £271,500 as of September this year, based on official figures from the Land Registry.

Harrison says that while he cannot say exactly how far prices will fall this time, his best estimate would be that they drop by 20 per cent.

Based on today’s prices, that would see £50,000 wiped from the value of the typical home and see average house prices settle around £217,000 – roughly where they were in early 2020.

Critics might point to the fact there has been no house price boom to precede the crash, as has been the norm with previous downturns.

House prices have barely risen over the past three years, due in part to higher mortgage rates.

However, Harrison’s answer to this is that much of the boom was already captured during the pandemic.

In just two years between August 2020 and August 2022, average prices rocketed from £220,000 to £265,000 – a staggering 20 per cent jump.

According to Harrison’s theory, a two-year ‘winner’s curse’ period usually happens just before a crash. This is when house prices accelerate through double digit annual increases as people are gripped by ‘speculation mania’. This is a widespread – and often unfounded – enthusiasm that drives prices to levels above what they should ordinarily be.

But this time round, Harrison says, the mania happened during the pandemic instead of just prior to the crash.

He says: ‘We banked the end-of-cycle house price uplift, during the two Covid years. The benefits were spread throughout regions north of London. Prices in the capital are already declining.’

House prices in London may have already reached their peak and could lead the upcoming crash ahead of the rest of the UK, he says.

What could cause a crash?

The big unknown is exactly what will cause the crash, Harrison says. But it takes less than you might imagine to spark a big downturn if the time is right.

He says: ‘Historically, the property cycle has not been able to limp on beyond 18 years, apart from a few exceptional cases. This time, there is nothing to postpone the end of the cycle on a global scale.

‘All that’s required is an event to cause a panic, and the rush out of stock markets will turn into a stampede and the cycle will terminate in the ginormous global crash.

‘With the crash, jobs will be lost, productivity will decline, wages will fall and so people will have less to save and invest in assets.’

There are a number of events that could trigger the next big downturn. One is the growing bubble in artificial intelligence investments in the United States. Investors are already getting jittery and expect share prices to fall and cryptocurrencies to nosedive. Global heavyweight sources have sounded warnings over an AI bubble, including the Bank of England, the International Monetary Fund and Dr Michael Burry, an investor best known for predicting the 2008 sub-prime mortgage crisis.

Harrison says the cause could come from anywhere: ‘In the end, it doesn’t matter who pulls the trigger. The crash will eclipse 2008.

‘This time, it will be Governments that are “too big to fail”. But who will bail them out?’

A crash in house prices would be a by-product of a wider global economic crash. This will turn into a period of depression, says Harrison, with widespread unemployment and a collapse in economic growth and trade.

How to shield your finances if the worst happens

It is tempting to act now to protect your home and finances but Harrison says the best way to prepare is to avoid taking any big risks.

Don’t panic and try to wait it out because a brighter future will emerge, in the same way that markets have eventually bounced back after previous crashes.

He says: ‘If the rout is as bad as I expect, there is no telling how to invest one’s money. Inflation is likely to be seriously high, so while cash may be safer than stocks and shares, its value will also diminish.

‘Gold is good, but its current purchase price is very high, so it is not easily accessible for average savers.’

The price of the precious metal has soared 60 per cent this year to a record high. Investors have flocked to gold, hoping it will offer safety during this time of heightened geopolitical tensions and uncertainty.

‘Hunkering down is the best advice I can give. Withdraw from risk taking. Try to minimise the loss of capital value. Wait to see what might emerge after the turbulence.’