Is 2008 when it happens?

Money Week, a website based in the UK, has an interesting article about the housing market. The claim is that the market cycles globally every 18 years and that we are due to hit bottom in 2008 resulting in a recession by 2010. It’s been said for a while that the bubble is about to burst, but it’s interesting that history does seem to repeat itself… We still have not entered the world of home ownership so the reduction in prices and an increase in inventory sounds nice!

“House prices can’t rise indefinitely for the simple reason that at some point they become unaffordable. Wages can’t rise as fast as house prices can when a speculative frenzy is underway, so there will come a point when the average man can’t buy the average house, and prices have to fall as a result. My research shows that this tends to work in 18-year cycles. There are usually 14 years of rising prices followed by four years of recession across the broader economy. I’ve looked at data across four continents and at 300 years of British economic history and it seems that this 18-year cycle is present across the globe, irrespective of the distinctive characteristics of each economy – whether the country is resource-rich (USA) or resource-poor (Japan), or whether the population is high density (the UK), or low density (Australia).

So when will the crunch really come? History suggests that things will start to collapse in 2008 (18 years on from 1990 when the last bubble burst)…the net result will be the arrival of recession by 2010…”

—Fred Harrison is executive director of the Land Research Trust in London.He is the author of Boom, Bust: House Prices, Banking and the Depression of 2010 (Shepheard Walwyn, 2005)