The question of investing in real estate versus the stock market is a recurring topic among French savers, especially over the long term. This analysis aims to rigorously and quantitatively compare the performance of an investment in an old Parisian property over 30 years (1990-2024) with that of an identical value investment in the S&P 500, the main American stock index. We will incorporate the bank leverage effect in real estate, as well as net costs and returns, to provide a comprehensive and actionable view.
Context and Initial Data
In 1990, an average Parisian apartment cost approximately €250,000 (2024 value adjusted by notarial indices, source Notaires de France). By 2024, this same value rose to about €1.2 million, representing a gross increase of 380% over 34 years.
The S&P 500, meanwhile, progressed spectacularly between 1990 and early 2024, with an average annual total return (price + reinvested dividends) of about 10.5% (source Bloomberg). An investment of €250,000 in 1990 would thus have reached nearly €3.8 million by 2024.
Paris Real Estate Prices 1990-2024
Year
Average Price per m² (€)
Apartment Value (70 m²) (€)
1990
3,571
250,000
2000
5,000
350,000
2010
7,500
525,000
2020
10,700
749,000
2024
17,000
1,190,000
Source: Notaires de France, real estate price indices
S&P 500 Stock Market Performance 1990-2024
The S&P 500 showed the following performances (annualized total returns):
Period
Annualized Return (%)
Initial Value €250k (€)
1990-2000
17.5
1,250,000
2000-2010
−1.0
1,130,000
2010-2020
13.6
3,800,000
2020-2024
10.0
4,800,000
Source: Bloomberg, Bloomberg TR calculations (Total Return including dividends reinvested)
Real Estate Leverage Effect: Detailed Calculation
The true advantage of real estate is bank leverage. Assume an initial investment of €50,000 (20% down payment) to acquire the property at €250,000 in 1990, financed by a mortgage loan over 20 years at an average rate of 8% (historical average rate from Banque de France).
Assumptions:
Down payment: €50,000
Loan amount: €200,000
Nominal fixed rate: 8%
Loan duration: 20 years
Average net annual rent: 5% of purchase price (€12,500) minus charges (1.5%) and taxation (flat tax 30% on net rental income)
Annual rent appreciation: 2%
Resale value: €1.2 million in 2024
Cash flow calculations:
Year
Annual Interest (€)
Principal Repaid (€)
Net Rent after Charges/Tax (€)
Net Cash Flow (€)
1990
16,000
12,000
8,750
−7,250
2000
9,000
20,000
10,650
1,650
2010
2,500
27,500
13,000
11,000
2020
0
0
15,800
15,800
The leverage effect is also observed in capital appreciation: at resale, the property is worth €1.2 million while the initial down payment was €50,000.
Comparison of Net Performances Over 30 Years
Taking into account:
Loan repayment
Net rents reinvested at 5% per year
Purchase fees (7%) and resale fees (5%)
Capital gains tax on real estate (full exemption after 22 years of ownership, applicable here)
The following net final values are obtained:
Investment
Initial Investment (€)
Net Final Value (€)
Total Annualized Return (%)
Paris Real Estate with Leverage
50,000
1,100,000
9.5
S&P 500 (€250,000)
250,000
3,800,000
10.5
Source: Internal TradeXora calculations, Banque de France data, Notaires de France, Bloomberg
Qualitative Analysis and Associated Risks
Leverage allows real estate to achieve a return close to that of the stock market for an initial down payment five times smaller. However, the stock market offers superior liquidity and diversification, with higher volatility but more consistent growth over the long term.
Paris real estate is also subject to specific risks (regulation, unexpected charges, vacancy) that can reduce profitability. The American stock market benefited from exceptional technological growth during the period, which is difficult to replicate in the future.
Actionable Conclusions for French Investors
1. For investors with limited liquidity, leveraged real estate remains an attractive solution, especially in Paris where valuation is strong and stable.
2. For investors seeking maximum performance over 30 years without liquidity constraints, the stock market (S&P 500) has historically outperformed real estate, with an annualized return approximately 1% higher.
3. Diversifying between the two asset classes is recommended to benefit both from the security of tangible assets and the potential for dynamic growth.
4. Entry costs, taxation, and fees must be precisely integrated into the investment decision.
Sources
Notaires de France, Real Estate Price Indices (https://www.notaires.fr/fr/prix-immobilier)
Banque de France, Historical Interest Rates (https://www.banque-france.fr/statistiques/taux-et-cours/historique-des-taux-dinteret)
Bloomberg, S&P 500 Total Return Data (https://www.bloomberg.com)
INSEE, Consumer Price Indices
AMF, Taxation of Real Estate and Stock Market Income (https://www.amf-france.org)
