Almost everything in nature happens in cycles. The season of the year, the way it rains, even the life of a tree – it’s all a part of a larger system. So it’s not surprising that things in the human world also happen in a cyclical fashion. But do these patterns have any place in what are generally considered abstract concepts, such as the housing market?
Some experts think that they very much do. Economist Fred Harrison has created a theory that the property cycle in the UK is based around an 18-year model. Harrison hasn’t just plucked this out of thin air, he has developed his model by extensively researching 300 years of UK property history.
What he found was that property prices seemed to go up or stay stable for around 14 years and then suffer a recession for about four years. He even warned Gordon Brown as early as 1997 that a crash was coming soon. In 2008, it happened.
How does the model work?
Harrison says that the housing boom drives the economy, especially the price of land. The more demand, the greater the speculation and the more growth there is. Lenders become more flexible and people are able to buy.
The theory shows that there are seven years of stability, followed by a mini slump. Seven more years of expressed growth happen before a larger crash halts progress for around four years.
Does the model work in Norwich?
In short, it does fit what’s happened in Norwich. That’s because the city has largely followed the rest of the UK in terms of house prices. The crash of 2008 was followed by several years of stagnation and falling prices but we have seen stability and growth return. In fact, we’re about three or four years into the first seven year cycle.
So does that mean that a mini slump is coming? Maybe. The model certainly works when applied retroactively. But in the current political climate, there are some unusual and extenuating factors that it may not take into account. How these will affect the model, and wider property market, is not 100% known as yet.
However, increased demand and a shortage of housing in the city is certainly leading to increased growth in the market. It may not be the big growth we saw before 2008 but the numbers are going up. So, whether Norwich fits the model or not, it is now a good time to invest.
To find out more about the local and national property market, or if you would like to chat about anything to do with property investment, give us a ring on Norwich 01603 567804 or send us a message.
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