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ianb78

18 year property cycle

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As I was tidying up I came across the book 'Boom and bust' written by Fred Harrison in 2005. It reminded me of his proposed 18 year property cycle and the fact that he predicted the 2007/08 crash with uncanny accuracy using this model.

 

The model proposes a four year 'recession' or downturn period followed by 7 years moderate growth and then 7 years higher growth (interspersed by a mid cycle wobble). The final two years are characterised by the 'winner's curse' with property prices rising exponentially prior to a crash.

 

taking a look at things it appears that his model is spot on. Following the crash in 07/08 we had four years of stagnant prices. Since around 2011/12 we've had moderate rises of around 5%. According to Harrison a mid term wobble should be approaching (?2018) which should be followed by seven years of significant rises up to a spectacular crash in 2025

 

Apparently this cycle has been playing out in cycles of 18-20 years for the last couple of hundred years! 

 

I personally feel that this model is more applicable to the UK excluding London which appears to operate almost as a separate country. Indeed taking out London everything seems to be panning out as predicted 

Thoughts?

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I think you might need to factor in that 07/08 was stopped in its tracks by the one eyed loon.

It didn't finish its work. 

How that might skew the model though, is beyond my ken.

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9 minutes ago, shindigger said:

I think you might need to factor in that 07/08 was stopped in its tracks by the one eyed loon.

It didn't finish its work. 

How that might skew the model though, is beyond my ken.

This it will be interesting to see how the all in support given to the housing market plays out on the cycle when its downward swing was shallowed due to state intervention.

It reminds me of the popular Mises quote you see on here.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

- Ludwig von Mises

 

Edited by Fromage Frais

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someone posted a video on this on the welcome thread, claims correction is not going to happen for another 10- years....!

 

Quote

 

Captain Peacock

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Hey folks,

Say here long time visiter, had to join cos just got an message from moneyweek that house prices are about to BOOM!

THESE are the people who have gone on for YEARS that prices are to COLASPE!

If moneyweek think this is the start of a new BOOM, then SURELY this is the signal of a inpending CRASH!

Heres the link if its allowed:http://pro.moneyweekresearch.com/CTC-1116-property/ECTCSB44/

 

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3 minutes ago, tyres said:

someone posted a video on this on the welcome thread, claims correction is not going to happen for another 10- years....!

 

  •  

Well if you pour more petrol on a bonfire the flames may burn higher but its going to burn quicker?

I would think that with credit being eased so much so fast that the highs in the cycle will be reached faster.

When you have houses like this going SSTC within a week in Norwich you know we cannot be far off

http://www.rightmove.co.uk/property-for-sale/property-46964352.html

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1 hour ago, ianb78 said:

I personally feel that this model is more applicable to the UK excluding London which appears to operate almost as a separate country. Indeed taking out London everything seems to be panning out as predicted 

Thoughts?

If you acknowledge London is different, why do think it can be explained by a rigid pattern?

The government and monetary and regulatory authorities have enacted a lot of measures to pump up and more recently deflate prices (some more obviously targeting house prices than others). The

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25 minutes ago, tyres said:

someone posted a video on this on the welcome thread, claims correction is not going to happen for another 10- years....!

 

  •  

Completely agree re Monkey Week.

Fair to say doomsayers everywhere, Mannarino, Schiff ,Hunter, and his Stetson wearing silver ramper, Celente.... all of em

Completely effing wrong.

Now, they could be "right" in six months time, but they've been "wrong" for nearing a decade now.

Not good enough chaps.

Edited by shindigger

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Well according to Fred (Jan 2016) the game will be up in 2019.

https://www.theguardian.com/commentisfree/2016/jan/29/heading-for-a-crash-global-economic-meltdown-panel-repeat-2008-china-slowdown

Quote

Britain is on course for a recession in 2019, a year before the general election. The crash will not happen before then because politicians and central bankers will appear not to lose their nerves.

The QE (quantitative easing) solution to the 2008 crash has rendered monetary policy useless as a fine-tuning instrument. Policymakers failed to adopt fiscal reforms that could have rescued the UK, so politicians have no tools to guide Britain out of the current turbulence.

Worldwide, central bankers will talk up any good news, hoping to persuade consumers to spend, even as wages continue to be battered. In the US the Fed will not take any chances in the run-up to November’s presidential election. Oil producers will finally do a deal to drive up petrol prices, which will be sold as a step towards normality. Debts will continue to grow, until a peak in house prices in 2019. Then the game will be up.

 

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I don't disagree with the OP, but the length of the cycle will be different I think because of the ZIRP. 

I don't think we had the true bust in 08 because of the protection afforded to banks. 

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Well we are going to be brexit in 2 years, yet you expect to see 7 years spectacular growth in house prices. Hmmm, personally i think once the 600k plus visitors per annun are curbed we aint gonna have 7 years spectacular growth, more like 7 years spectacular crash! Dont forget 25% of new births in the UK in 2016 are currently from non british.

Edited by GreenDevil

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3 hours ago, shindigger said:

Completely agree re Monkey Week.

Fair to say doomsayers everywhere, Mannarino, Schiff ,Hunter, and his Stetson wearing silver ramper, Celente.... all of em

Completely effing wrong.

Now, they could be "right" in six months time, but they've been "wrong" for nearing a decade now.

Not good enough chaps.

Cristiano Ronaldo, round the keeper, 6 inches out, doesn't even have to touch the ball to score as it's already rolling in...... Everybody on the planet 100% expects him to score...... They just couldn't legislate for a central defender to appear on the goal line in a puff of smoke..... Then another..... Then another until the goal was full of defenders.

Nobody would factor in such wild interventions.

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I just don't think Harrison's theory holds for this period.

Not only because of the things other posters have already mentioned (bailouts, ZIRP) but also because of buy-to-let and globalisation.

The reason London had a relatively shallow crash and quick bounce-back was that buy-to-let and consent-to-let gave homeowners an out.

Once upon a time if you wanted to get out of your London place you had to sell and take the hit. But with BTL/CTL at mega-low interest rates you had the option to rent it out instead. You also benefitted from strong demand with FTBs locked out of the mortgage market and London pulling in people looking for jobs from the rest of the UK and Europe. 

Then after sterling tanked money from emerging markets rushed into into Prime Central London and bubbled out into the rest of London. 

Edit - tossing in another reason, politics, the banks had to hold off repossessions because they'd been bailed out

Edited by Patient London FTB

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the market is so grotesquely distorted that I dont know that these cycles are now of much assistance.

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7 minutes ago, Little Frank said:

Harrison's cycle is, in essence, the credit cycle. Mid-cycle wobble is usually a recession.

See BIS/BoE for details....

So yes, OP is correct.

credit cycle is one thing,that's fairly natural, just like growing your own veg..you expect a bit of seasonality and times to plant/harvest.

the problem with the economic cycles of late is there has been a lot of baby-bio smothered on the crops in the hope that they will continue to grow,despite a distinct lack of sunshine.(aka perception management via media)

it's a dishonest market,and as such,will act like an elastic band,being stretched ever tighter,until one day it snaps...

 

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Just now, oracle said:

credit cycle is one thing,that's fairly natural, just like growing your own veg..you expect a bit of seasonality and times to plant/harvest.

the problem with the economic cycles of late is there has been a lot of baby-bio smothered on the crops in the hope that they will continue to grow,despite a distinct lack of sunshine.(aka perception management via media..ie when prices ARE going down,the stats are fabricated to give a longer term average,so it looks like it's "just easing off"..when prices go UP, the M-O-M figure is bandied about to make it look like it's going batsh1t mental)

it's a dishonest market,and as such,will act like an elastic band,being stretched ever tighter,until one day it snaps...

 

 

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50 minutes ago, Noallegiance said:

Cristiano Ronaldo, round the keeper, 6 inches out, doesn't even have to touch the ball to score as it's already rolling in...... Everybody on the planet 100% expects him to score...... They just couldn't legislate for a central defender to appear on the goal line in a puff of smoke..... Then another..... Then another until the goal was full of defenders.

Nobody would factor in such wild interventions.

And then the physio

 

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Is there really any evidence for this 18 year cycle occurring for hundreds of years?

 

My admittedly limited knowledge of historical house prices gave me the impression that, prior to the 1970's, HPI had been very steady and very modest, no major peaks and troughs and no booms and busts? 

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6 minutes ago, nome said:

Is there really any evidence for this 18 year cycle occurring for hundreds of years?

 

My admittedly limited knowledge of historical house prices gave me the impression that, prior to the 1970's, HPI had been very steady and very modest, no major peaks and troughs and no booms and busts? 

There you go: XLS Table 502: house prices from 1930, annual house price ...Your browser indicates if you've visited this link

of house price inflation, it is not ideal. This is because movements in the simple average house price can ... 1950.00 1940.35 1951.00 2115.42 1952.00

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In his book Harrison meticulously identifies each 'primary recession' and 'mid-cycle recession' from 1776 onwards which appears to fit with his model. 

I suspect the economic and political issues vary over the years but the economic or credit cycle combined with the finite nature of 'land' tends to cause this cyclical boom and bust phenomenon. Government intervention may alter the pattern or ameliorate the peaks and troughs but the time spans seem to be similar 

whatever it's an interesting theory and his prediction was remarkable last time 

 

 

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5 hours ago, shindigger said:

I think you might need to factor in that 07/08 was stopped in its tracks by the one eyed loon.

It didn't finish its work. 

How that might skew the model though, is beyond my ken.

This might also skew the model

 

Bank-of-England-Base-Rate-1901-2016.png

 

() Government Bond Yield US UK.png

Edited by Untoward
wrong chart

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2 hours ago, Noallegiance said:

Cristiano Ronaldo, round the keeper, 6 inches out, doesn't even have to touch the ball to score as it's already rolling in...... Everybody on the planet 100% expects him to score...... They just couldn't legislate for a central defender to appear on the goal line in a puff of smoke..... Then another..... Then another until the goal was full of defenders.

Nobody would factor in such wild interventions.

 Well they bloody well should have done. They are the experts are they not? 

Plenty of amateurs on here knew damn well, (in fact never stopped predicting) that there would be interventions in every way, in every market, at every stage.

Why is it so hard for the Youtube experts to not get this? 10 years ffs. Look how their promises of "crash tomorrow" have played out.

Set dates when it will go tits up quoted left right and centre. Tedious. Anyone who has stayed out of stocks on their recommendations, for this long, has missed out on a fortune.

And still they spout.

They'll be right one day of course.

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Well ten years ago all i needed to do was set my Harrisonian crash clock for July 2007, having regard that the previous crash started in July 1989. not only did it start that month, who knows it could have been the very second and minute from the previous July 1989 ' whistle blowing moment'. :wacko: 

Now referring to Harrison's timetable when does the next train arrive, July19th 2025 at 9.30am  perhaps ?

 

 

Edited by crashmonitor

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So if we get a mega crash in 2025 will prices fall to below where they are now - or will they still be higher?

Cos there is no point waiting and renting 10 years if the prices post crash will be higher than now surely? Should we await article 50 or just go for it?

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