Will there be a global real estate crash in 2027? ‘Housing price prophet’ still thinks so

The house price prophet who predicted the last two downturns says prices remain on track to peak in 2026 before collapsing again.

Fred Harrison, an author and economic commentator, is House prices are expected to continue rising until the end of 2026 before the next big real estate crash occurs.

He stands by this forecast, despite only modest growth in house prices this year.

On a year-on-year basis, Nationwide said house prices rose 3.7 percent, with prices still 1 percent below the all-time high seen in summer 2022.

Harrison is known 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 like the pandemic.

“Since the Second World War, Britain – and the global economy – has gone through three 18-year business cycles,” he told This is Money.

‘These cycles were driven and shaped by a fourteen-year real estate cycle. This starts with affordable home prices, continues through the mid-cycle of the ninth-year decline in home prices, and then rises to the peak of home prices at the end of fourteen years.

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

‘The most recent cycles were timely, ending in 1974, 1992 and 2010. The OECD real house price index has been tracking this phenomenon since 1970 and the peaks and valleys are there for all to see.’

What is the 18-year real estate cycle theory?

According to Harrison, the real estate cycle consists of two main phases.

After each crash, the real estate market takes about four years to resume its upward trajectory.

This, he says, will be followed by six to seven years of modest growth in what is known as the recovery phase.

Then there is a mid-cycle dip, often a one or two year downturn in the market, before a new growth phase follows, usually lasting another six or seven years.

Harrison believes the pandemic has disrupted the last six or seven years of growth, with home prices actually rising by double digits in 2021 and 2022.

However, he says prices have now recalibrated over the course of 2023 and 2024 and will continue to rise.

“Real estate agents are talking about how home prices have fallen since 2022,” Harrison said. ‘The reality is that the Covid pandemic has disrupted the economy, including the housing market.

‘With the end of the pandemic, house prices have returned to their fourteen-year growth path.

‘The price drop should be treated as a psychological illusion. Prices continue their upward and upward trajectory.”

Based on Harrison’s cycle, we are now approaching the peak.

“If all goes according to plan, the fourth cycle will end in 2028, with house prices rising over the next two years before reaching their peak in 2026,” he says.

However, Harrison’s prediction for the next two years comes with a caveat.

“The historical evidence shows that a world war can break the cycle – that’s what happened in the 1930s,” he adds.

‘Will Vladimir Putin decide to drop an atomic bomb on Ukraine? If that is the case, all chances for the UK housing market are off.”

How much will house prices rise in 2026?

According to Harrison, a two-year “winner’s curse” typically signals the end of the fourteen-year real estate cycle.

This is the time when house prices typically rise in double-digit annual increases as people are in the grip of ‘speculation mania’.

This time, however, Harrison says, is different, thanks to the pandemic real estate boom.

“We have already processed the double-digit increases,” he says. ‘Thanks to Covid and the generosity of governments, trillions of dollars, pounds and euros have been poured into economies. The housing market captured a large part of that money.

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

“Governments poured in the printed money by the summer of 2020, and hey, the housing market swallowed up that largesse with rising prices.

“Increases exceeded 10 percent annual growth before the slush fund was depleted… and the housing cycle returned to normal.”

Despite the Covid-19 boom, Harrison believes house prices could rise by around 15 per cent between now and the end of 2026.

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

How Trump will drive up house prices in Britain

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

“Donald Trump’s decision to cut tax rates will give the US housing market a huge boost and raise expectations in much of the rest of the world, including Britain,” he said.

‘This effect is inevitable in America: the housing market automatically benefits from the benefits of tax cuts.

‘In Britain, property prices will rise steadily. A 15 percent increase is my best estimate.

‘The Starmer government will fail to accelerate house building. Then there is the £5 billion the government says it will invest in agriculture over the next two years, which will push up prices across the country.

‘But Starmer’s tax on employers will act as a dampener on the rate of rise in UK prices.

“And keep in mind that the explosive price growth has already stalled during the two-year pandemic. 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 until 2030, without a peak in 2026.

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

This is a prediction that Harrison strongly refutes.

“If you believe the OBR, there won’t be a huge downturn,” he says. ‘But the 18-year business cycle is part of the DNA of the economy. So if Putin doesn’t do something stupid, house prices will stagnate in 2026.

‘I cannot predict in which quarter the peak will appear. This time I wouldn’t be surprised if the cycle continues until the spring of 2027.’

Harrison has no doubt that a real estate crash will happen then, but isn’t speculating — at least not yet — on exactly how bad it will be.

“It depends on a number of global events and how they might interact to amplify the downward escalation,” he says.

‘I am currently reviewing historical evidence to understand what awaits us in 2028. The results will be available in the spring.’

Harrison adds, “In 2007, subprime mortgages buried in bank vaults were blamed for the financial crisis. Banks were bailed out because they were ‘too big to fail.’

“It will be even worse this time as global headwinds hit house prices. Debt levels around the world are reaching 100 percent or more of GDP, and interest rates are getting harder.

‘By the end of 2026, bankrupt governments will be ‘too big to fail’. But who will save them?’