Rising land prices will precipitate a housing recession in 2010 according to a new book.
Britain will face a large-scale recession in 2010 a housing expert has warned.
Research director Fred Harrison forecasted a rise in commercial and property markets until the end of 2007 after which he said a slump would occur. Harrison correctly predicted the 1992 recession using residential land value trends in 1983.
In his new book Boom Bust Harrison argued that the mechanism driving the business cycle is the housing and property market, not employment or inflation.
Harrison, research director of the Land Research Trust, said that economic problems occur when land costs exceed house prices and pointed out that finance ministers have failed and will continue to fail because they do not consider land important in a market economy.
Harrison told the Observer: “Brown wants us to believe that his decision to make the Bank of England independent was a turning point in economic policy, but the US Federal Reserve has been independent for the best part of a century and presided over one boom/bust after another.”
Harrison concluded that policymakers must revise their treatment of land in economic decisions or the rise of interest rate on mortgages could lead to house buyers paying a heavy price in the 2010 bust.