The man who predicted the property crash

Ross Clark

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

The 50 pence racks in the nation’s bookshops brim with books promising an Armageddon which somehow failed to arrive – other than for the author. One thinks, naturally, of The Great Reckoning: Protect yourself in the coming depression by James Dale Davidson and William Rees-Mogg, published in April 1993, on the cusp of what turned out to be one of the world’s great stock market and property booms. But don’t think that being proved right gives your doom-mongering tome a longer life on the bookshelves. Stuck down at around 22,000 on the Amazon sales chart last week (which roughly translates as: one person has bought it in the past week) is a fascinating work called Boom Bust: House prices, banking and the depression of 2010, by Fred Harrison.

The book was not widely reviewed when published in 2005. Harrison was not the only economist who had warned of an impending house price crash, and did not come across as the most qualified. A former journalist who had set up his own think tank, the Land Research Trust, there was little reason to assume that he had any more idea of what was going on than had Andrew Oswald, Professor of Economics at Warwick University, who predicted in 2003 that house prices would plummet by 30 per cent over two years; nor Steven Bell of Deutsche Bank who had made a similar prediction in 2002; nor Roger Bootle of Capital Economics who foresaw prices slumping 20 per cent in 2004; nor any of the other rent-a-quotes on the housing market whose failed prophecies, by 2005, were beginning to tire readers.

Not only that, the book rambled a bit, with long diversions on such subjects as the Roman Road system in Shropshire. Worse, Harrison’s thesis – that the property market is governed by an 18-year cycle in land prices – seemed to have been borrowed from a Chicago academic-turned-property speculator, Home Hoyt, who had derived it from a study of property booms in 19th-century Chicago, but who himself believed the cycle no longer to be applicable. I confess that I never quite finished my copy of Boom Bust.

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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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