Every so often, someone sends me an article making the case that real estate isn’t a great investment compared to the stock market.
The latest one came from the Globe and Mail. It argues that Canadian home prices haven’t grown as much as the stock market — specifically the S&P/TSX Index — since the 1980s. The author says that over the last 45 years, Canadian homes have gone up about 5.5 percent per year, while the TSX (with dividends reinvested) has grown closer to 9 percent.
At first glance, that sounds pretty convincing.
But as someone who has worked in both the mortgage world and the investment world, I can tell you — the comparison isn’t really fair.
So let’s take a closer look at how these numbers stack up when we even out the playing field.
1. Comparing the top of one market to the average of another
The TSX Index tracks the top 200+ companies in Canada. It doesn’t include the weaker ones, the ones that went bust, or the companies that just didn’t make it.
But the article compares this top-tier list of stocks to the average home across the entire country — including rural areas, towns with declining populations, and markets that haven’t grown much at all.
That’s like comparing the Toronto Maple Leafs to your local beer league team and saying hockey isn’t what it used to be.Ok, ok, maybe not the best comparison but you get the idea.
So instead, let’s compare top to top.
In 1980, the average home price in Toronto was about $75,694.
Today, it’s around $1,120,250.
That works out to roughly 7.06 percent growth per year — and that’s without including rental income, and without using a mortgage to boost returns.
2. What about the TSX?
Using data from 1979 to 2024, the TSX index (excluding dividends) grew from about 1,765.90 to 25,691.80.
That’s an annual growth rate of about 6.22 percent.
Again, no income included, just the basic index price.
So when we just look at price growth — Toronto real estate actually edges out the TSX.
3. Let’s talk about risk
Now here’s the part most people skip.
Investments are not just about how much you make — they’re also about how much risk you take to make it.
Stocks bounce up and down a lot more than housing prices do. And that can be stressful, especially if you’re planning your retirement or saving for something important.
There’s a simple way to measure how much return you’re getting for each unit of risk. Without diving into technical terms, here’s what the numbers show:
For every unit of risk taken, Toronto housing has delivered over 3 times more return than the TSX (when we look at price growth only).
That’s a big deal. And it’s something that’s often missing from these comparisons.
4. What about income?
The article includes dividends for stocks, but skips over the fact that many homeowners — especially in the 1980s — bought properties with rental units.
Whether it was a basement apartment, a duplex, or a triplex, that rental income helped pay the mortgage, generated cash flow, or got reinvested elsewhere.
If we’re going to include dividend income for stocks, we should include rental income for real estate too.
So, which is better?
This isn’t about saying housing is better than stocks, or vice versa.
Both can be great tools when used properly.
Both can also be risky when misunderstood.
The point is simple:
If we’re going to compare, let’s make it a fair fight.
Real estate isn’t perfect. But it’s also not the underperformer some people make it out to be — especially when you dig into the full picture.