In the two-and-a-half years since the first edition appeared, events have unfolded as predicted. In 2005, the consensus among forecasters was that the boom in house prices would cool to an annual 2 or 3 percent rise over the following years. In fact, in keeping with the winner’s curse phase of the cycle described by the author, prices rose by more than 10 percent per annum in Britain. Harrison’s first book, The Power in the Land, predicted the early 1990s recession. Boom Bust, warned that investing in property is not always a safe bet, because the market is subject to a sharp downturn at the end of a remarkably regular 18-year cycle. If history repeats, the next tipping point is due at the end of 2007 or early 2008. This forecast is based on a careful study of the evidence from property markets, not only in the UK, but over the last 200 years. The reason for the instability is not the housing market itself, but the land market on which all buildings stand. Land is in fixed supply; therefore, as the demand for land for new homes and offices rises with population growth and economic expansion, market forces, which normally increase supply to reduce prices, have the reverse effect: prices rise. This encourages speculation, with banks lending more against escalating asset values and reinforcing the upward spiral.
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