Two €100,000 cheques. One goes to a broker to buy an MSCI World ETF. The other becomes a down payment on a rental apartment. Twenty years later, which investment wins? The answer, like most things in finance, is: it depends — on leverage, on the market, on your tax situation, and on what you did with the rental income.
This article does something most comparisons don't: it runs the numbers honestly, accounting for all costs on both sides, and presents three realistic scenarios including the most powerful tool in real estate's arsenal — mortgage leverage.
On a cash-for-cash basis, diversified global equities (MSCI World, 7%/yr) outperform residential rental property (4–5% net) over 20 years. But real estate with leverage (20% down payment on mortgage) can outperform stocks in total value, at the cost of illiquidity, stress and credit risk. The ideal solution for most investors: both.
Emma is a marketing director who sold her Toronto condo in 2024 (Toronto average price: C$1.1M) and moved to Paris. After settling in, she has €100,000 sitting in her Livret A. Coming from Canada — where the stock market vs real estate debate is almost a religion — she wants to make a smart, data-driven decision. We'll follow her analysis throughout this article. Her situation: stable income, 20-year horizon, French tax resident, moderate-to-high risk tolerance.
Historical Returns: Stocks vs Real Estate
Before simulating the future, let's look at what history tells us about long-term returns in France, Canada and globally.
| Asset class | Country/Index | Annual total return (20-yr avg) | Note |
|---|---|---|---|
| Global equities | MSCI World (USD) | +10.4% | Dividends reinvested. ~7% inflation-adjusted |
| US equities | S&P 500 | +11.2% | Dividends reinvested. Best 20-yr period in history |
| TSX Composite | Canada | +7.8% | Lower than US; heavy energy/financials exposure |
| CAC 40 (TR) | France | +8.9% | Total return version; plain CAC 40 price only ~5% |
| Paris residential RE | France — Paris | +5.8% | Price appreciation only. Peak 2020, -12% since |
| French national RE | France — National | +3.1% | Price appreciation only. Very uneven by city |
| Toronto RE | Canada — Toronto | +8.2% | Price only. But: 2022-2023 saw -20% correction |
| Rental net yield (France) | France — average | +3.5% | Net of fees/vacancies/maintenance, before tax |
Emma watched Toronto house prices fall -20% between spring 2022 and late 2023 — the steepest correction since the 1990s — as the Bank of Canada raised rates from 0.25% to 5.0% in 18 months. Highly leveraged buyers who purchased at the 2022 peak saw their equity wiped out. The TSX, by contrast, recovered quickly. Real estate leverage works brilliantly in falling-rate environments; it becomes treacherous in rising-rate ones.
€100,000 Simulation: 10 and 20 Years
We model three scenarios from an initial €100,000 investment, using realistic assumptions for France in 2026:
| Scenario | Description | Annual return (equity) | Key assumption |
|---|---|---|---|
| A — ETF (MSCI World) | €100K in a PEA, MSCI World accumulating ETF, no leverage | 7.0%/yr | Historical 20-yr inflation-adj. average. PEA tax wrapper |
| B — Rental RE, no mortgage | €100K cash purchase of a studio in a French city. Net rental yield 4%, price appreciation 2%/yr | 4.5%/yr net | No leverage. All-in: purchase costs 8%, maintenance 1%/yr |
| C — Rental RE with 80% mortgage | €100K as 20% deposit on a €500K apartment. Mortgage 3.5%/20yr. Rent covers 70% of mortgage payment | ~8.5%/yr on equity | Leverage ×5. Equity grows on €500K asset, not €100K. Includes mortgage costs & stress |
Simulation Results at Year 10 and Year 20
| Scenario | Value at Year 10 | Value at Year 20 | Total gain |
|---|---|---|---|
| A — ETF MSCI World (7%) | €196,715 | €386,968 | +€286,968 |
| B — RE cash purchase (4.5%) | €155,297 | €241,172 | +€141,172 |
| C — RE leveraged 80% mortgage | ~€228,000 | ~€497,000 | +€397,000* |
*Scenario C net of mortgage interest and purchase costs. Assumes 3.5%/yr mortgage rate, 3% annual property appreciation, net rent yield 4% on total property value. Leverage risk not reflected in the single-number summary.
6-Dimension Comparison: The Full Picture
Real Estate's Superpower: Leverage
The single most important variable in the stocks vs real estate debate is mortgage leverage. With €100,000, you can either buy €100,000 of stocks — or control a €500,000 property. A 3% appreciation on €500,000 = €15,000 gain on your €100,000 equity — a 15% return before rent is even counted.
This leverage effect is why many French investors have built considerable wealth through buy-to-let property, despite lower nominal returns than the stock market. You simply cannot borrow money at 3.5% to invest in stocks (most brokers won't lend on that basis, and margin rates are much higher).
Emma watched Toronto buyers who put 5% down in 2021 (C$50,000 on a C$1,000,000 property) lose their entire equity when prices fell 20% in 2022-2023. Their equity went from C$50K to negative C$150,000 (underwater mortgage). High leverage amplifies both gains AND losses. Scenario C only works if property prices hold or rise and if you can service the mortgage throughout — including if your tenant stops paying or interest rates rise on renewal.
Tax Treatment: France vs Canada
France — Stocks Win on Tax
| Investment | Tax on gains | Tax on income | Wrapper available |
|---|---|---|---|
| Stocks — PEA (after 5 yrs) | 17.2% (social charges only) | 0% if reinvested | PEA — €150K ceiling |
| Stocks — Assurance-Vie (after 8 yrs) | 24.7% | Reinvested tax-free | AV — unlimited |
| Stocks — CTO | 30% flat tax (PFU) | 30% flat tax | No wrapper |
| Rental income (all) | 30% on capital gain (or progressive) | Marginal rate + 17.2% social charges | No equivalent wrapper |
| SCPI — via AV | 24.7% after 8 yrs | Sheltered in AV | Assurance-Vie |
Key insight: A French investor who holds an MSCI World ETF in a PEA for 20 years pays only 17.2% on exit. A landlord pays their full marginal income tax rate (up to 45% + 17.2% = 62.2%) on every euro of rental income every year. This tax drag significantly reduces real estate's net return for high earners.
Canada — TFSA and RRSP Are Game-Changers
Emma's situation illustrates Canada's advantage for equity investors. The TFSA (Tax-Free Savings Account) allows C$7,000/year in contributions (2026), with all growth and withdrawals completely tax-free — essentially a super-ISA. Her accumulated TFSA room from age 18 means over C$95,000 of tax-free investment space.
| Account | Annual limit | Tax on gains | French equivalent |
|---|---|---|---|
| TFSA | C$7,000/yr (cumulative) | 0% | PEA (more limited) |
| RRSP | 18% of income | Deferred to withdrawal | PER |
| FHSA | C$8,000/yr (first home) | 0% (if used for home) | No equivalent |
| Non-registered account | Unlimited | 50% inclusion rate on capital gains | CTO (less favourable) |
Emma's move: She keeps her Canadian TFSA invested (VGRO — Vanguard Growth ETF portfolio, 80% equities) and opens a French PEA for her €100,000. The TFSA + PEA combination gives her maximum tax-free equity exposure in both countries she calls home.
Liquidity and the Hidden Cost of Real Estate
Stock market liquidity is invisible until you need it — and when you need it, it's priceless. Selling €100,000 of MSCI World ETF takes 3 seconds and costs €3–10 in brokerage fees. Selling a €500,000 apartment in France takes 3–6 months and costs 5–8% in notary/agency fees — that's €25,000–€40,000 just to exit.
| Cost item | Stocks (ETF) | Real estate (direct) |
|---|---|---|
| Purchase costs | 0.1% (brokerage) | 7–10% (notary + agency = €7,000–€10,000 per €100K) |
| Annual running costs | 0.1–0.4% (ETF fee) | 1.5–3% (taxe foncière, insurance, maintenance, vacancies) |
| Sale costs | 0.1% (brokerage) | 3–6% (agency fees) + CGT + social charges |
| Time to sell | Seconds | 3–12 months |
| Minimum divisibility | €1 (fractional ETF) | Full property (€50K–€1M+) |
Best of Both Worlds: SCPI and REITs
For investors who want real estate exposure without illiquidity and direct management, two vehicles offer a practical middle ground:
SCPI — France's "Paper Stone"
SCPIs (covered in detail in our dedicated guide) give you professionally managed commercial real estate exposure from €200 to several thousand euros, with quarterly income of 4–7%. They're far more liquid than direct property and can be held inside an Assurance-Vie for optimal tax treatment. Emma invests €20,000 of her €100K in Remake Live SCPI via Linxea Spirit 2, keeping €80,000 in the PEA for ETFs.
REITs — Canada and the UK
Real Estate Investment Trusts are listed companies that own real estate portfolios. They pay 90%+ of profits as dividends and trade on stock exchanges. In Canada, REITs held inside a TFSA pay dividends completely tax-free — no withholding tax on Canadian REITs in a TFSA. Popular options: RioCan REIT (retail), Canadian Apartment Properties REIT (residential), Granite REIT (industrial).
Which Profile Should Choose What?
| Profile | Recommended approach | Allocation suggestion |
|---|---|---|
| Young saver, small capital (<€30K) | Stocks only | 100% MSCI World ETF in PEA |
| First-time property buyer | Buy primary residence, invest spare in ETF | Mortgage on home + PEA for liquid savings |
| Capital €50K–€150K, no immediate need | ETF + SCPI via AV | 70% ETF (PEA) + 30% SCPI (AV) |
| Capital €150K+, stable income | Buy rental property + ETF | 50% rental property (with mortgage) + 50% ETF/PEA |
| High earner (TMI 41%+) | Avoid direct rental income; prefer SCPI via AV | ETF (PEA) + SCPI (AV) + PER for tax deduction |
| Canadian expat in France (like Emma) | TFSA (Canada) + PEA (France) + SCPI | VGRO in TFSA + MSCI World in PEA + €20K SCPI in AV |
Our Verdict: Stop Choosing, Start Combining
The stocks vs real estate debate is a false binary. The question isn't which is better, but how to combine them optimally for your situation. Here's the distilled answer:
- €100K with no property yet: 80% in MSCI World ETF (PEA) + 20% in SCPI via Assurance-Vie. Don't rush into property — your PEA's 5-year clock matters.
- €100K with stable income and good credit: use it as a down payment on a €400–500K rental property in a city with yield >5% gross. Let leverage do the work.
- €100K and you might need access within 5 years: stocks only. Real estate is illiquid — don't trap capital you may need.
- Tax bracket TMI 30%+: rental income is brutally taxed in France. If you want real estate, go SCPI in an Assurance-Vie, not direct ownership.
- Canadian-like mindset (Emma): max the TFSA, open a PEA, and treat SCPI as your "real estate allocation" in France — tax-efficient, passive, no tenant drama.
Frequently Asked Questions
Is it better to invest in stocks or real estate?
Historically, diversified global equities (MSCI World) have outperformed real estate in total return on a cash-for-cash basis. However, real estate's leverage effect can amplify equity returns significantly. The best answer for most investors is both: a PEA or ISA for equities and a buy-to-let or SCPI for real estate. The right split depends on your liquidity needs, time horizon and access to mortgage credit.
What is the average return on rental property in France in 2026?
Gross yields range from 2.5–3.5% in Paris to 5–7% in some provincial cities. After fees, vacancies and maintenance, net yields typically fall to 1.5–4.5%. Including capital appreciation (~2–3%/yr nationally), total net returns before tax average 3.5–6%/yr depending on location and management.
Can you invest in real estate with €100,000 without buying a property?
Yes — SCPIs allow real estate investment from €200, distributing 4–7% quarterly income with no landlord management. In Canada, REITs held in a TFSA provide real estate exposure completely tax-free. Both give diversified property exposure without illiquidity or entry costs of direct ownership.