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Will Brexit break the 18-year house price boom cycle?

By Surrenden Invest | April 17, 2019

Will Brexit break the 18-year house price boom cycle?

According to Fred Harrison, the property market operates in an 18-year cycle. Prices grow steadily for six to seven years, correct a little, then increase for another five to six years. A crash then brings prices down, with a four to five year recovery period preceding the next steady growth phase.

Harrison’s theory has proven to be correct over the past 70 years or so. Prices crashed, or at least slumped significantly, in 1953-54, 1971-72, 1989-90 and 2007-08. Based on this cycle, we’re currently due a correction, then another period of strong growth. Prices in London and the South East certainly seem to be correcting at present, which indicates the period to around 2025-26 should bring growth, but could the UK’s departure from the EU finally break the cycle, triggering an earlier crash? Surrenden Invest’s MD, Jonathan Stephens, thinks not.

“The 18-year property cycle theory is one that has played out repeatedly over the last several decades. This has been despite changing political and economic circumstances both within the UK and more widely around the world. Brexit, while a significant upheaval for the UK, is more likely to impact on the value of stocks and shares and on sterling than it is on the housing market. Property prices aren’t so fast to react to politics and so provide greater stability.”

Jonathan Stephens, MD, Surrenden Invest
Savills, too, believes that Brexit won’t be enough to break the cycle. That company’s Autumn 2018 Residential Property Forecasts report paints a positive picture of house price growth over the five years to 2023, with compound growth of 14.8% nationally. The report also supports the correction part of the 18-year cycle theory, showing a 2.0% drop in London prices for 2019 followed by a year of nil growth in 2020, before prices rise again in 2021. The South East and East of England, meanwhile, show as prices flatlining over the course of this year, before rising again in 2020.

“The correction in London and the South looks to be localised to just those regions, with central and northern parts of England enjoying impressive growth over the coming years. From a buy to let property UK perspective, regional cities such as Birmingham, Manchester, Liverpool and Newcastle therefore present some of the most exciting investment opportunities in the country.”

Jonathan Stephens, MD, Surrenden Invest
Developments such as No. 76 in Birmingham deliver just the right sort of attractive opportunity for investors with a regional focus. The ultra-prime location of the apartments means that they are ideally placed to benefit from the huge inner city regeneration projects taking place in and around Birmingham’s B1 postcode area. From a price perspective, the potential for growth is therefore huge.
Brexit aside, if the 18-year house price cycle proves correct once again, property owners can look forward to at least another six or seven years of booming prices before they have to worry about an impending crash!

For the latest news on investing in regional UK cities, follow the Surrenden Invest team on social media.

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