The 18-year property cycle

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The 18-year property cycle

In this blogpost I’d like to introduce you to an important concept that explains why property prices move up and down and what you can do to time your property investments right.

What is the 18-year property cycle?

In simple terms, the 18-year property cycle is a concept that suggests the property market will boom, then be followed by a crash every 18 years – give or take a little. As far as we can tell, the economist Homer Hoyt was the first to identify this cycle and another economist called Fred Harrison wrote about it in his book “Boom Bust”, predicting a fall in 2007/2008.  The UK suffered record drops in house prices during that time and even the harshest cynics had to concede that there may be something in this theory. Harrison’s book goes on to trace the same cycle over hundreds of years with surprising accuracy.

Why is the 18-year property cycle important?

The property market, like any other market, can be unpredictable and reliant on many factors. For example, property values in some regions of the UK have suffered a slight dip due to ongoing political uncertainty, especially in London. So, anything that helps us predict the unpredictable must be worth its weight in gold, right?

Some people will argue that the 18-year cycle isn’t relevant because the property market isn’t as unstable as many other markets – hence the phrase ‘safe as houses. But no investment is without risk, and merely leaving your money tied up until prices rise again isn’t a strategy that everyone can afford. Between the lowest point to the highest, property values will see plenty of ups and downs. Whilst the 18-year property cycle won’t tell you the best time to invest or sell, what it can do is to help you avoid the worst time to invest or sell, and that’s why it’s important. Think of it as limiting risk, not completely removing it. Even if it’s not an exact science, having a basic template of how the market will act can alter your decision-making.

How does the 18-year property cycle work?

It starts with why the property market can be considered unstable. According to Fred Harrison, it’s not the housing market that causes instability: it’s the land market. Land for building new homes is in limited supply, which means we can’t make more of it. While the world’s landmass remains the same, the population continues to grow, in turn increasing the demand for housing and the need for land. Markets typically fluctuate due to supply & demand: supply is increased when demand is high, and prices then balance out. When supply can’t be improved, property values boom, and banks lend more against rising asset values, supporting the upward trajectory. That gives us what Harrison calls the ‘Winners Curse’ part of the cycle, or the highest point. Only a crash can bring land/property values back down to earth, bringing us to the end of the cycle.

The whole 18-year property cycle has some distinct phases: the recovery phase, the explosive phase, and the recession phase.

Recovery Phase: Years 1 – 7

The recovery phase, as the name suggests, is when the market starts to recover from the previous crash. Experienced investors look at this period as an opportunity to buy cheap and ride out the storm for long-term gain. Low property prices are even more attractive to buyers because the average rent will stay the same. So, for example, a property that would previously provide a 6% yield can easily give a 9% yield because of the lower purchase price. First-time buyers, who perhaps currently rent, might also be attracted by the lower sale prices and might take advantage of Help To Buy schemes. However, for other buyers, banks are far less eager to grant mortgages in this phase while they recover from excessive lending during the last boom.

As people start to invest in property more and trust in the market begins to return, you see a slow but steady increase in property value. At the tail end of the recovery phase, the property market then experiences something called the mid-cycle dip. This is a short period when property values drop slightly before coming back up early in the explosive phase. This dip happens when investors who bought early start to sell for short-term profits.

Explosive Phase: Years 7 – 14

Now safely out of the recovery phase, things are clearly on the up. Everything is in full swing: banks are lending again; new projects are being built and people are buying. Instead of being nervous about losing money, people are now worried about missing out. Property values are rising so fast that people are scared if they don’t buy now, their dream home will soon be unattainable. Or they are so convinced that prices will keep rising that they want in on the profits. While this buying frenzy is going on, the investors who bought when prices were low are now selling to make a profit.

As mentioned before, the ‘Winner’s Curse’ now comes into effect, where despite the fact that prices are now at the highest point in the entire cycle and are heading towards a huge drop, buyers still rush to purchase due to fear of missing out and make emotionally charged bids on properties, which results in them paying more than they should.  

Phases of the 18-year property cycle

Recession Phase: Years 14 – 18

This phase is a time to panic for some, but an excellent opportunity for others. Despite assurances that the most recent boom is the one to last, a recession is always around the corner. If there wasn’t a recession, and prices continued to rise much faster than the average wage, very few people in the grand scheme of things would-be property owners.

Buyers experiencing their first significant slump will be understandably nervous to see their investment plummet. So nervous, that some will look to sell at rock bottom prices to cut their losses. There are many reasons people would consider selling at this point other than sheer panic. For example, if someone bought to sell, expecting a short-term significant return, they may find themselves fighting a losing battle to pay bills when the recession hits. In that situation, waiting for the recovery isn’t always an option.

The result of people selling up and trying to salvage what they can is that prices continue to drop. To add to the bleak market landscape, banks may make the headlines as they struggle. The more widespread panic there is, the less negotiating power the seller has, and desperation takes over. For many it becomes a choice between sinking with the ship or grabbing anything they can. However, many investors wait to capitalize when prices hit their lowest point because they know that every recession is followed by a recovery, and the cycle starts all over again. Ideally, you want to buy when the recession comes or early in the recovery phase but don’t be too specific with timing, trying to squeeze every last penny out of a deal, or you might miss the boat.

What phase are we in now?

Given that the last major recession was in 2008/9, that means we are now in the explosive phase. According to the 18-year property cycle, that also means the next recession is expected around 2026 – 2027.

Due to factors like Brexit, some localised UK property markets may still be experiencing a slight dip before rising again.

How does it affect the Scottish property market?

According to the latest UK Government House Price Index, house sales in Scotland have decreased by 13.5% in the last year. Despite this drop in sales, property prices have continued to rise faster than in the rest of the UK. Average property prices in Scotland have seen a yearly growth of 1.6%, compared to an annual UK growth of 1.3%. House prices in Scotland have grown faster than the UK average every month since December 2017.

How can you profit from the cycle?

There is no sure way to buy and sell at precisely the right time, every time. As history shows, the cycle lasts an average of 18 years, but in reality, that could mean 16 years or 20 years: it is not an exact science. Even experienced investors don’t know when prices are at their absolute highest and lowest: they make educated decisions with the cycle in mind. No housing boom will last forever and every recession will have a recovery; the main thing you should take from it is not to buy or sell at the worst possible time. This knowledge should also prevent you from over-stretching yourself with a purchase and being forced to sell at the wrong time.

Don’t rely on tabloid fanfare or scaremongering to form your strategy. The media’s job is to report the news, but it’s also to sell newspapers and advertising space. If you listen to the tabloids, every boom will last forever, and every recession is the end of the world – after all, drama sells! As an investor, you need to remain focused on facts.


If you read four articles on the 18-year property cycle, you’d probably get two positive opinions and two negative ones. Our take on it is that history doesn’t lie: you can’t argue with facts. Now, we can’t tell you that the cycle will exist forever but as of right now, we don’t see any reason not to take advantage of this knowledge.

If you’d like to discuss the implication of the 18-year property cycle on your investments then please get in touch with us and we’re happy to continue the discussion. You can reach us on 01786 821012 or simply by emailing us at