For Canadians, real estate has long been the go-to path to wealth. It’s familiar, tangible, and offers the comfort of control. But while housing markets have delivered steady gains, equity markets, particularly in the U.S., have quietly outperformed.

Let's take a closer look at how both asset classes stack up and why the best portfolios often blend the two.

What the numbers say

According to the Canadian Home Price Index (HPI), home prices have grown at an annualized 5.2% over the past 20 years. But for investors, real estate returns aren't just about appreciation. Rental income can significantly enhance total returns.

To illustrate this, we modeled three scenarios based on different rental outcomes and compared them:

• Scenario 1: Owner-occupied with no rental income as the base (total return: HPI of 5.2%)
• Scenario 2: HPI plus a 2% net rental yield - reflecting an average rental market (total return: 7.2%)
• Scenario 3: HPI plus a 4% net rental yield - typical of a hot rental market or a property with lower costs (total return: 9.2%)

These figures represent total modeled annualized returns since 2005, combining both home price appreciation and net rental income. Let's compare them to equity markets over the same 20-year period:

Source: All data as of October 31, 2025. Housing price data compiled by RBC Global Asset Management Inc. from Canadian Real Estate Association (CREA). S&P/ TSX Composite and S&P 500 Total Return (CAD) Index data compiled by RBC Global Asset Management Inc. All returns are annualized, and where applicable, compounded assuming reinvestment of all distributions.

Whether you live in it or rent it out, real estate has its advantages. Yet the stock market offers compelling benefits that are difficult to ignore. The S&P 500'S 11.6% annualized return significantly outpaces even the most optimistic real estate scenario of 9.0% (HPI + 4% rental yield). This difference compounds over time, leading to much greater wealth accumulation for long-term investors.

Pros and cons, side by side

When comparing two very different investments there can be a lot to think about. With respect to the market returns discussed above, here are some additional factors to consider:

What the market tells us now

Real estate has had an exceptional run over many decades, driven by low interest rates, limited supply and strong demand. But in today's residential markets, with interest rates elevated and affordability stretched, future gains may not match the past.

Equities, on the other hand, continue to be powered by earnings, innovation, and global momentum. Yes, volatility is a part of the journey, but for long-term investors, the trend has consistently been upward.

Key takeaway

Real estate builds stability. Stocks build momentum. The strongest portfolios know how to harness both. If you value control, income and a long-term anchor, real estate can deliver. If you want growth, flexibility and scalability, equities are hard to beat.