The man who predicted the property crash

Economist Fred Harrison proved to be the canary in the housing mine, reveals Ross Clark – but few were listening

Nevertheless, there was something that made me keep ringing up Harrison to hear his latest thoughts on the housing market. And I have to say that he never even wavered from his prediction that the housing boom would end in a spell of mania in 2007, followed by bust in 2008. In fact, Fred had been made this prediction much earlier than 2005: he later sent me a yellowed pamphlet entitled The Coming Housing Crash which he had published in 1997 containing the prophetic words: ‘By 2007, Britain and most of the other industrially advanced economies will be in the throes of frenzied activity in the land market to equal what happened in 1988/89. Land prices will be near their 18-year peak, driven by an exponential growth rate, on the verge of the collapse that will presage the global depression of 2010.’

We haven’t yet reached 2010 and global depression, but otherwise the prediction is chilling: Nostradamus, even in one of those translations helpfully provided after the event, could scarcely have been more accurate. Part of me thinks that it ought not to be possible to predict economic events 11 years in advance. So was Harrison just lucky or is there really something in the 18-year property market cycle theory?

The bottoms of the last two housing crashes, in 1974 and 1992, do conform to the pattern – although the 1974 crash was only a crash in real terms, static house prices being overtaken by soaring inflation. Little official data exists on the housing market before the Seventies, though I will take Harrison’s word for it that the other data he quotes, such as that derived from the numbers of bricks manufactured in each year of the 18th century, makes a case for an 18-year cycle in property booms going back 200 years or more.

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Richard

October 2nd, 2008 6:49pm Report this comment

Mr Clark has omitted the early 80s fall in house prices from his calculations in support of Harrison. Also, I don't think that house prices fell particularly in 1966 or 1948. 3 data points don't make an economic cycle!

heatonfan

October 4th, 2008 4:23pm Report this comment

Harrison's book is fairly easy to read. Ross Clark also fails to mention, inexcusably, that Fred Harrison timed the housing crash in the late 80's correctly in his writings in the early 80's. His book uses far more than 3 data points.
Disappointedly, Clark fails to mention the central these of the book at all: land value tax would prevent these booms and busts and stablise the economy.
Highly recommended.

Johannes Kulsdom

November 26th, 2008 6:38pm Report this comment

From the comments, it is clear , that people do not understand that the LAND QUESTION,that is not dealt with,is the primary cause,of the bust that follows .and that is the cause of the banking crisis !Learn about the Land-question, and it might make the solution more clear !

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