Should You Buy or Rent in 2025?

Today, I want to help you figure out if you should be buying or renting this year. We're going to look at this from the perspective of a homeowner, not a landlord or a second home. I've also put together a free tool that can hopefully be a guide to help you with your own personal circumstances, but we'll look at this from a couple of different angles. I will sit here and say though, to start, I am aware that for many people watching and for millions of Brits all over the UK, buying a house is an unrealistic goal because of how broken the housing market is, and I am sensitive to that point. You know, it makes me think, should I make this video? Because I don't want to come across as out of touch, but I also get lots of questions from people all of the time saying, "Should I buy? Should I rent?" And I don't want to ignore those either. Anyway, let's get on with it, and let's start with the real cost of buying.

Compare the market in 2024 released research that looked at unexpected costs around purchasing a home. Their research showed that a large number of home buyers significantly underestimated the cost of getting the keys to a house. 41% said that the average cost of £1,521 for legal fees was a surprise, and the total combined cost of all that "Oh crap, I didn't think about that" was £5,837. Then there's the 15% of people who had unplanned building costs totaling near £7,000. Not to mention the stamp duty changes that come in from the 1st of April 2025, which now means 83% of home buyers will be paying stamp duty, up from 49%, including first-time buyers who purchase homes over £300,000. If these costs come as a surprise to you or not isn't really the point. The thing is that a lot of these costs are one-off upfront costs of purchase specific to buying a home that you can't really recoup or get back in any way. Every time you buy a house, there are these series of costs on top of the deposit requirements that are very real, and they can push into the thousands of pounds. So these costs will, of course, factor into the decision when you're tossing up whether you should buy or rent.

I often hear people say things as well like, "Oh, you should always buy because at least when you buy you're building equity, and when you rent that's dead money." I mean, this is true to a degree, but I think people should really consider and work out, "How much equity am I building?" To give you a simple example, here is a chart that shows the amount of interest and principal being paid on a mortgage over 25 years where the monthly payment is around £1,400. Notice in the early years the bulk of the payment is going on interest. In the first year, £1,000 a month is interest, and £400 is repayment off the balance—AKA you building equity. This relationship where you pay more in interest early on is known as amortization, or with mortgages, the mortgage amortization schedule. When you combine this with the one-off fixed costs such as stamp duty and legal fees, and then you balance that with raising rents and increasing house prices over the period of time that you plan to live there, and then the opportunity cost of just taking all of your money that you were going to use for the property and sticking it in a bank account, you can see that this becomes quite a complicated and nuanced and individual calculation to make. Let's call it a buy versus rent break-even analysis. This idea that there is a point in time where actually renting is cheaper than buying, and then a switch happens. I'm not really satisfied sitting here saying to you, "Well, it completely depends on your circumstances," which it clearly does.

So what I've done is I've put together a free tool that you can download that hopefully will help you visualize this a bit better. In the description and pin comment is a link. If you just click on it and submit your email, I'll email this to you. It's a Google sheet where you can go through and put in your specific inputs relating to your property purchase or your circumstances around renting, and it will spit out the break-even analysis for you. There's also a full video in the email giving you an overview or example of how to use everything so that you get it all right. If you want a general rule of thumb, then over shorter periods of time you might find that renting is actually more cost-effective than buying a home. Again, completely dependent on the individual circumstances, but when you factor in all of the one-off costs associated with getting into the property, not to mention if you're a first-time buyer, you lose that first-time buyer status, which is very valuable because of the reduced stamp duty rates, even at the newer post-April 1st rates. But yeah, have a play around with that calculator, and I hope it helps you work this out. But yeah, rough rule of thumb is if you're not looking to live in a property for, say, beyond 5 years, it might not be worth it, and just consider that it's not always best to just buy a property because of all of those one-off upfront costs.

Next, let's look at: Is now a good time to buy? No one wants to buy a house and then see prices fall. Besides this feeling that you could have got something for cheaper than you did, is this real threat of negative equity, especially in the early years of purchase? The UK housing market has experienced what I would call five significant property declines since the start of the 1900s. Be honest, with the amount of people that talk about property crashes all the time, would you have thought that it was more than that? You can see why they call the Great Depression the Great Depression. Every other crash since average prices fell by between 15 and 25%. This is an average price, though. Regional differences are massive. But five big declines in around 100 years, so that tells us that they're not that common, but they do happen. Every decline is different, but there are certain factors that some of them share in common. This chart plots UK inflation and the Bank of England base rate—so the interest rate. If we add in the mid-1970s house price decline and the one in the '90s, it's clear that periods of high inflation that are then combined by a rise in interest rates are a good precursor of a potential decline in house prices. Higher interest rates make mortgages more expensive, so the same house on the same street now costs more money to buy than it did, and as such, prices come down. So these significant declines over the last 100 years have averaged at a rate of about one every 20 years, with the last one being in around 2008. And one common reason for those declines is a significant rise in interest rates. And here we are, 2025. We sit here now, almost 20 years on from the last major decline, after we've just seen a steep increase in interest rates. Where's the crash? There were property experts staking their entire reputation on the fact that the housing market would collapse, and yet this is what we saw in average prices: a moderate decline, a flat market, and then in 2024 prices actually went up by around 4%. What gives? Is it coming, or has it already happened?

This chart plots UK nominal house prices—as in the amount of money you would need to hand over to buy the average home—whereas this line plots the same average house price but adjusted for inflation. Let's say you have £100,000 in a bank account getting 0% in interest, and inflation is 10% for a year. You know, at the end of the year, the £100,000 is still sat there; you can still see it in your bank account, but it now buys less stuff than it did last year. The purchasing power has fallen by the amount of inflation. Now, instead of a bank account, let's pretend that that £100,000 is set in bricks. If house prices don't rise, they stay flat, or they simply fail to grow at the rate of inflation, the purchasing power of the money that's tied up in those bricks decreases in the same way it would have in a bank account. This period here of relatively flat growth in property prices coincided with sky-high inflation, so in real terms, house prices have fallen—a so-called silent crash. From the peak in 2022 to the inflation-adjusted bottom of Q1 2024, this decline here is a real-terms decline of 10 to 11%. Other sources put it at 15 to 20%, depending on which house price data you use. I could sit here and make a really compelling case as to why now is a terrible time to buy a home: uncertainty around interest rates, uncertainty around the economy, Labour's plans to build more homes, dumping more supply into the market which could reduce prices, certain types of property performing badly at the minute—city center apartments potentially—or just concerns around the quality of the build of new builds. Add to that the fact that housing affordability remains stretched and well above long-term averages. It's so easy to be negative and to put yourself off buying for a multitude of reasons at any point, but I also think it's possible to make a case why it's a great time to buy.

Let's first of all not ignore that every government ever has promised more homes and never delivered on it. The buy-to-let market is getting tough on landlords, so many are exiting, meaning there is an increase of units coming to the market, and really for the first time for a long while, it's a buyer's market, giving you the ability to potentially make a cheeky offer on a property. But I don't think any of that really matters. I think it's all speculation. Like I said, you could argue both cases convincingly, and people could listen to either and make a decision. What I think really matters is the real benefit of home ownership is the fact that once you've paid it off, you significantly reduce the amount of money that you need to live off each month, meaning you require less in retirement savings. If you don't own a home at retirement and you're renting the average rental property, which is about £1,248 a month at the minute, £15,480, £185,900 approximately in retirement savings just to cover that rent. Will there be a crash at some point? Most definitely. Boom and bust cycles are just part of the asset-buying process. It's more about human behavior than anything else, but no one knows when that crash will come, no matter how good their reasoning is, no matter how sound their argument. The reason people talk about crashes with such conviction is because it gets them lots of attention. Do your best to ignore it if you can and go. The aim here really is to hopefully get a paid-off home before I retire to relieve the pressure on my retirement savings. So if I'm ready to buy, and there's a property that I like, and I know I want to live there for the long term, and I can afford that house today, and I've also worked out if I can afford it if interest rates change, let's get that process going. Is this reframing of a home as a home, a shelter, and not some financial asset where we speculate on the price going up and down? That's the mental shift that needs to happen. And you know that view of a home as a home really was corrupted by recent times. For the longest time, home ownership in the UK was pretty uncommon, and then post-World War II, through the expansion of housing stock, the selling of council houses, and wider availability of lending, home ownership rates went from 25% up to a peak of 70% in 2003. That short burst of around 50 years changed the way us Brits think about our homes in two big ways: it made us think that home ownership was an essential part of being an adult here in the UK, but it also convinced us that our homes were our greatest investment because this rise in home ownership coincided with one of the largest increases in property prices on record. Houses went up by about 150 times over the period. But both statements can't be true, can they? Long term, we can't have a system whereby most people can afford to buy their home, but houses provide exceptional investment returns versus other asset classes. Houses need to remain affordable so people can buy them, or the investment case demand needs to outstrip supply to keep pushing prices up. As we sit here today, home ownership rates are falling, and millions of Brits are being denied access to the home-owning democracy. The investment belief has been prioritized over the home ownership one. If that will change on a national scale, I don't know, but on an individual level, I think when it comes to this question of buying a home, framing it as a home and not as an investment is a crucial step.

Let's just play a game, and I want to show you what I mean when it comes to trying to balance both. I've got three properties here, and I want you to tell me which one you're buying, which one you're renting, and which one you're putting in the bin. Just on face value, judge it from the perspective of where you want to live, but also where you think will make you the most money over time. So just try and balance both priorities at once. The first house is in central London: 25 Porchester Terrace. The second is another flat: 23d Cranley Gardens, also in London. It's funny how in London they call places Gardens when they don't actually have one. Third and final flat is in Birmingham: 24d Edgbaston Court, North Park Road. What are you picking? Which is going to be the best home while also providing the best potential for investment returns? 25 Porchester has been an exceptional money maker. Between 2002 and 2013, it went up from £648k to £3.5 million, and Rightmove estimates today that it's worth £4.4 million. But 25 Porchester has an unusual next-door neighbor: the Metropolitan Railway. It runs right next to the house. Around the corner are the famous facade houses—fake houses that are used to cover up this tunnel—but on this side, it's just a drop down to the train track below. That section of track accommodates hundreds of trains a day, up to 28 an hour in peak times. Are you happy living next to this train track, constant trains rushing past your window all hours of the day? Okay, then what about Cranley Gardens? In 1996, it sold for £83,000, and today it's worth £520,000, which is a steal when you consider other flats in the area sell at over £700,000. Great investment. There's a little important detail about this house: it was Dennis Nilsen's house. I'll let you Google what happened in here, but if you buy a house that was a scene of a murder or multiple murders, it tends to lose value by about 30%. Not to mention, you know, the vibes. Great on paper investment, but would you fancy living here?

Okay, then finally, the flat in Birmingham. Not really the best investment, especially not in the early '90s. The young woman who lived here with her son fell into negative equity, meaning that she was essentially trapped in the house, but she could afford the mortgage, and you know it was big enough for their needs at the time, so she stuck around. She did sell it in the year 2000 after the prices recovered, and she eventually doubled her money. Ask her son somewhat he thought about the place though, and he would probably tell you that the communal stairway was spooky because the lights didn't work properly; the bins outside that everyone used to use, they smelt weird; and there was one time he went in there, and there was someone burning tinfoil. But the gardens out the back, they were glorious; they were great for playing with his mates, and his school was just across the field, so his mom would let him walk there by himself, which made him feel like a grown-up. This was my home. I love this place. It was everything I needed it to be as a kid, and I wouldn't swap it for anywhere else in the world. I didn't view it from the perspective of money or the return it generated. I was oblivious to the fact that we were living in negative equity. I just simply thought, "This is where I live; it's near my school; it's near my mates; there's some amazing hiding places that are great when we play hide-and-seek." And I think as a culture we need to get back to viewing homes as homes and ask ourselves questions like, "Do I want to live here? Do I like the area? Is it convenient for me? And do I want to be here long term?" These are the big questions that you need to ask first of all when deciding if you want to buy or rent in 2025.