When will house prices finally crash?

Britain has now entered the last two years of the property cycle. In fact, prices could already have peaked. Here's why - and what you can do to protect yourself against the coming fall.

"A sharp fall in real house prices is likely at some point in the relatively near future." So said David Miles, Morgan Stanley's UK chief economist, earlier this week. The former adviser to Gordon Brown believes that more than half of the increase in house prices in recent years has been driven by the mistaken belief that prices will just keep rising at double-digit rates. Once these expectations are disappointed, the market will be subject to a "sharp reversal".

As to when the crash will come, he is more vague, suggesting it could be two years away, and describing attempts at calling the top of the market as pretty "hopeless". I disagree. Look at the right data and a clear cyclical property pattern emerges. It suggests that by this time next year, the housing market could already have peaked. Let me explain.

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