Economist who predicted last two housing crashes warns the market is already in freefall. Your home’s value could plummet by £82,000 – here’s what to do to protect yourself

The house price prophet who predicted the last two market downturns years before they happened says a new property market crash has already begun.

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.

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. 

Since 2021, the economist has been warning the next property crash would begin in 2026 – and he still holds this conviction today. 

While Harrison’s views may seem alarmist compared to predictions from major lenders, prices have been falling in recent 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. 

Harrison has an impressive record of accurately predicting house price 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.

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. His warnings played out, as markets went into freefall in 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.

‘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. 

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 – Harrison says the next one is due now. 

The economist says he has identified the cycle as operating within the UK for at least 300 years.

Although the property cycle is not an exact timeline, 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 six or seven years.

When will the crash happen?

The market crash has already begun, according to Harrison, who warns that we have now entered a period of ‘protracted decline’.

Harrison points out that prices have been falling for some time across London, the South East and South West of England. Indeed, Land Registry data show prices are now lower on average in these regions than they were four years ago.

When adjusting for inflation, it means prices across the south have already fallen in real terms by around 20 per cent.

He expects house prices to fall in 2027 and keep dropping through 2028, based on his 18-year 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.

Overall, home values have stagnated in recent years, inching slowly higher, thanks largely to rising prices in the North of England and Scotland. 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.

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.

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.

‘The crash has already begun in the housing market, but the driving forces are camouflaged by activities across global markets. In particular, the AI industry, which is by-and-large a real estate operation, is disguising the trends,’ says Harrison.

‘With all that money pouring into the tech corporations, analysts think economies are booming. But those investments are based on almost pure speculation in the future.’

According to Harrison, the underlying force behind rising prices in the property market is the finite supply of land. 

‘Boom and bust cycles are systemically embedded in the architecture of the economy,’ says Harrison.

‘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. They steadily increased over the housing cycle, and are now faltering.

‘The housing market’s fate will be revealed when the crazy sums stop pouring into Silicon Valley – which has started.’

Last week, a slump in technology stocks fuelled fears of a market crash. As of Friday, the tech-heavy Nasdaq index had fallen almost 8 per cent in three weeks.

Analysts warned of ‘tech carnage’ with shares in Google owner Alphabet down more than 12 per cent, US giant Intel nosedived 29 per cent, while Amazon, Meta and Nvidia are all down between 3 and 4 per cent over the past week.

He adds: ‘Along with other events – such as Trump’s intervention in Iran, consumer spending will be slashed, laying the groundwork for a further stiff fall in property prices.’

What is causing the crash? 

While Harrison says the crash has already begun, he still believes there is an impending trigger that will send prices cascading down from here. What that trigger will be is impossible to say, he says.

‘The whole world is fragile, so there is no telling what will trigger the tipping point,’ says Harrison. 

‘We have the peak and crash of AI, which will depend on investors’ resolve before they panic. We don’t know whether President Xi means it, when he says China will recover Taiwan in 2027 and the patience of the bond markets cannot be forecast, since we don’t know how western governments will ultimately cave in and start to seriously cut back on spending.

‘The implosion starts when a major bank keels over, or governments can’t raise money because bond markets suddenly back out. 

‘Or perhaps Trump has another disastrous trick up his sleeve as he tries to recover power from the losses of the election later this month.’

How bad will it get?

Harrison warns this crash will be the worst in a generation and that the ensuing recovery will be slow and painful.

He says: ‘We are now entering a phase in history where there will not be a quick two-year bounce-back from the end of the 18-year housing cycle. 

‘I foresee a period of protracted global chaos. Anything could happen. Share prices in stock markets will crash, as commerce endures savage cut-backs in consumer spending.

‘The only thing I expect over the next four years is that we cannot expect any outcome, other than the worst.’ 

So what should property owners do?

Any homeowner with a mortgage or buy-to-let investor will likely be somewhat dismayed by Harrison’s prophecy.

Should it prove correct, households with mortgages risk finding they are in a situation where their mortgage becomes worth more than their home’s value – what is known as negative equity.

This will leave people unable to remortgage to a different lender or move home.

Harrison has little word of comfort for people with mortgages but says the best way to prepare is to avoid taking any big risks – whether on investments or by borrowing.

Households should try not to panic and should wait out the storm because a brighter future will emerge, he says, in the same way that markets have eventually bounced back after previous crashes. 

His suggestion is to consider investing in gold or commodities and precious metals.

‘Hunker down,’ says Harrison. ‘Escalating inflation will wipe out a huge chunk of the value of cash, so gold and assets invested in minerals needed by the digital industry are the best bets.’

Could Harrison be wrong this time?

Many across the property industry are unconvinced by Harrison’s bold and gloomy prediction for the housing market.

Estate agent Connells Group is forecasting UK house prices will rise by 1.5 per cent next year followed by a 2.5 per cent increase in 2028 and further 2 per cent rise in 2029.

This is similar to last week’s predictions set out by the Office for Budget Responsibility, the Government’s official forecaster. It estimates average house prices will rise by 2.5 per cent in 2027 followed by 2.75 per cent annual growth from 2028 onwards. 

Buy-to-let investor Rob Dix, co-founder of Property Hub and co-host of the Property Podcast has been aware of Harrison’s 18-year cycle for a long time.

He thinks the cycle isn’t playing out as it should be this time around and thinks a major crash is looking extremely unlikely.

‘As I understand it, the theory of the 18 year cycle treats the timing as systemic – with external events short of major wars just being noise,’ says Dix. ‘It also talks about the ‘winners’ curse’ phase of frenzied activity and rapid price rises which tip over into the bust.

‘Given that prices have been falling in real terms for years and are now falling nominally in some areas, we’re a long way from mania. 

‘And as interest rates have already normalised, it’s hard to see a sudden shock there being the trigger for a sharp 30 per cent crash.’

While mortgage deals have risen by around 1.25 percentage points since the conflict in the Middle East began, they still remain just below the highs reached in the summer of 2023.

According to Rightmove, the average two-year fixed mortgage rate is now around 5.55 per cent, up from 4.25 per cent before the war in Iran started, adding around £250 a month to the cost of a typical new mortgage since February. 

Dix adds: ‘I also struggle to see how an AI data centre bust gets transmitted into residential lending that brings down the housing market.’

While Dix says it’s possible there could be a significant house price crash due to an external shock, the cause this time won’t be a result of runaway lending and land speculation.

He adds: ‘Without the distinctive shape of the cycle – where new highs in land prices provide a warning that a bust is coming, it lacks predictive power.

‘Understanding the theory and its mechanism would have allowed someone to avoid timing the market very poorly in 2007-2008 – but I’m not convinced that it would be so helpful this time around.’

Robert Gardner, chief economist at Nationwide Building Society, says he thinks a crash is unlikely. He says that once the shock of higher energy bills fades, the market will regain momentum.

‘The broader economy has proven surprisingly resilient to date, with annual economic growth accelerating in recent quarters,’ says Gardner.

‘Employment is holding up well, as are real incomes, while household balance sheets are solid, with debt levels still close to 20-year lows relative to household disposable income.

‘Moreover, the improvement in housing affordability seen over the past two years has been only partially unwound as a result of higher market interest rates, as income growth has continued to outpace house price growth by a wide margin.’