The three households
The illustration is a married or PACS couple resident and taxed in France, with no children and no pre-existing investment accounts. All three households start at the end of January 2006 with the same €35,000 and a €200,000 home in mind.
The buyer pays a 10% deposit and 7.5% purchase costs, €35,000 in all, and borrows €180,000 over 20 years at 3.52%, the average French rate on new house-purchase loans that month. The repayment is €1,045.78 a month, plus €45 of borrower insurance and upkeep and property tax of 1% of the home's value a year.
The two renters live in the same home for €683 a month, 4.1% of the price a year, revised every January with the official rent index. Each month the common housing-and-saving budget is the larger of rent and the buyer’s housing outlay. The household with the cheaper housing cost invests the difference, initially about €574 for each renter.
One renter invests the difference and the initial €35,000 in world stocks; the other uses savings accounts. After the final mortgage payment in January 2026, the buyer saves the difference and the renters make no further contributions or withdrawals.
| Input | Value | Source |
|---|
| Home value | INSEE old-home price index, +37.1% from January 2006 to June 2026 | INSEE, idbank 010567059 |
| Loan rate | 3.52%, fixed for 20 years | ECB, France, new loans for house purchase, January 2006 |
| Rent | 4.1% of the price a year, then indexed: €897 a month by 2026 | INSEE Première 1350 and the IRL |
| World stocks | MSCI World, net dividends reinvested, in euros: ×5.72 | MSCI index 990100 |
| Savings rate | Livret A rate; regulated interest tax-free, excess deposits in taxable savings | service-public.fr |
| Purchase costs | 7.5%, including 5.09% transfer duties in 2006 | Notary scale and duties; assumption |
| Upkeep, property tax, insurance | 1% of the value a year; 0.3% of the loan a year | Assumptions |
| Fund costs | 0.3% a year; 0.8% inside an assurance-vie | Assumptions |
The 4.1% rent is INSEE's median ratio of annual rent to estimated price for privately rented flats used as main homes in 2006, from the national housing survey. In Paris the ratio was 3.8%. INSEE explicitly says this ratio is not a rental yield or a rent-versus-buy recommendation. It describes the median private-sector flat, while the price index covers all existing homes: this is a composite national illustration, not a matched history for one property.
What happened month by month
Source: INSEE, ECB, MSCI; monthly paths (CSV).
The renter who invested started ahead, because the €35,000 of deposit and purchase costs went into the market instead of into a home. The 2008 crash erased that lead. The buyer led in many months between February 2007 and January 2013, by up to €26,106 in September 2011. At the end of 2008 the household with savings accounts was ahead of both.
The renter who invested took the lead for good in February 2013 and widened it as stocks compounded. The chart is before fund costs and tax: €692k for the renter who invested, €278k for the buyer and €196k for the renter who saved. The buyer's line flattens in 2023 and 2024, when French home prices fell.
Why renting and investing came out ahead
Three numbers explain most of the gap. French old-home prices rose 1.6% a year from January 2006 to June 2026, while consumer prices rose 46% in total, so the home lost value in real terms. World stocks returned 8.9% a year in euros with dividends.
At the outset, annualised loan interest was 3.17% of the home’s price, plus 1.27% for upkeep, property tax and borrower insurance, compared with rent of 4.1%. Principal repayments build equity and are counted separately from those costs.
Borrowing magnifies the home's result: the buyer's €35,000 controlled a €200,000 asset. Starting equity of €20,000 became €274k, but most of that came from the €180,000 of loan repayments, not from the 37% price rise. The renter's contributions, €159,007 in all, were exposed to stocks with no borrowing, and the market did the rest.
Taxes: what each household keeps
Source: after-tax results (CSV).
These are estimates after standard investment taxes on a June 2026 exit, with two equally funded accounts per wrapper. The PEA estimate includes historical social rates on gains accrued before 2018, using month-end valuations; the tax statement of a real provider can differ. Possible high-income contributions (CEHR/CDHR), which depend on total household income and exceptional-income rules, are excluded and can lower the securities-account or assurance-vie proceeds.
The main comparison excludes selling fees; a separate 3% selling-cost scenario reduces the buyer’s proceeds to €269,513.
| Household | Before tax | After tax | Rule applied |
|---|
| Buyer | €277,809 | €277,741 | Main residence gain exempt (service-public.fr); spare cash invested in an accumulating taxable fund |
| Renter investing, PEA | €660,574 | €570,532 | After five years, income-tax exemption; historical social rates before 2018, then 18.6% at the 2026 exit (PEA, rates) |
| Renter investing, securities account | €660,574 | €503,082 | 31.4% flat tax on the gain: 12.8% income tax and 18.6% social contributions (service-public.fr) |
| Renter investing, assurance-vie | €611,744 | €500,608 | After eight years, 7.5% on the gain above €9,200 for a couple, plus 17.2% (service-public.fr); 0.5% contract fee a year |
| Renter saving, regulated and taxable accounts | €195,660 | €190,339 | Regulated-account interest stays tax-free, including interest above deposit ceilings; new money above the ceilings goes into taxable savings |
The main-residence capital gain is exempt, subject to the usual residence conditions at sale. The avoided rent is already included in the cash-flow comparison and is not taxed as imputed rental income. Property tax remains payable and is included in the upkeep assumption; ordinary mortgage interest is not deductible (Service Public).
The historical TEPA credit applied to eligible acquisitions from 6 May 2007, with loan offers issued before 2011 and acquisition completed by 30 September 2011. For an existing home, it covered 40% of the first loan annuity’s interest and 20% of the next four, with a €7,500 annual interest ceiling for a jointly taxed childless couple. The January 2006 buyer received none.
For a May 2007 purchase at 4.23%, the model gives €8,475 of TEPA refunds. Each calendar year’s refund is invested the following September, an explicit timing assumption. With tax on those investments, the buyer ends at €274,830, versus €235,944 without the credit and €556,224 for the renter’s PEA. Different rules applied to some new buildings; none is assumed here.
Historical PEA social rates improve the base result by an estimated €3,250: about €571k, compared with €567k if all gains were charged at 18.6%. The couple deposits €159,007 in total, split equally between two PEAs, within the €132,000-per-person ceiling before 2014 and €150,000 thereafter. The buyer’s later investments use a taxable fund: a PEA newly opened in 2026 would not already qualify for the five-year exemption.
The assurance-vie illustration also assumes two equally funded spouse contracts and no other contracts, so each spouse stays below €150,000 of premiums. After eight years, the joint annual gain allowance is €9,200; the remaining qualifying gains face 7.5% income tax, and all gains face 17.2% social contributions. The allowance does not reduce social contributions. With one contract or other premiums, part of the gain can face 12.8% income tax.
The savings household uses two Livret A and two CODEVI/LDD/LDDS accounts. Their combined deposit ceilings were €39,800 in 2006 and €69,900 from 2013; capitalised interest can exceed them and remains tax-free. Interest capitalises annually, with month-end deposits earning from the next fortnight; extra money earns the same assumed rate in taxable savings. For 2013-2017, it chooses the lower of the assumed 30% income-tax bracket with deductible CSG and the optional 24% income-tax rate available when total taxable interest does not exceed €2,000 (CGI article 125 A, I bis).
The 7.5% purchase-cost assumption includes 5.09% transfer duties in 2006, plus notarial and other acquisition costs. The temporary 0.5-percentage-point departmental increase allowed from April 2025 is not retroactive and has an exception for qualifying first-time main-home buyers. It is not applied to the 2006 purchase.
The 30% main-residence allowance for IFI can reduce taxable property wealth. Here the home is below the €1.3 million IFI threshold even before the allowance, and the household has no other property, so no IFI is charged.
Depreciation and other housing reliefs
There is no tax depreciation deduction for the main home you live in. Paying down mortgage principal reduces the debt; it is not a deductible expense either. Normal upkeep is included in the 1% annual ownership-cost assumption. The model adds no separate physical-depreciation charge, and a national price index cannot predict a particular building’s ageing or exceptional renovation bills.
Furnished letting under the real-expense regime is different: qualifying expenses, interest and accounting depreciation can reduce taxable rental profit. Land cannot be depreciated, and deductible depreciation cannot itself create a rental deficit; unused depreciation may carry forward under the applicable conditions. For example, €10,000 rent less €4,000 expenses and €4,000 eligible depreciation leaves €2,000 taxable profit, rather than €6,000 before depreciation. This rental example is not included in the home-occupation comparison.
For most LMNP disposals from 15 February 2025, depreciation previously deducted reduces the acquisition cost used for capital-gains tax, increasing the taxable gain before holding-period relief. Certain service residences are excepted (tax administration). A rental-property comparison needs rent received, vacancy, running costs and disposal tax on both sides; adding its depreciation relief to a main-home purchase would mix different uses of the property.
A PTZ, subsidised employer or social-accession loan, historical accession assistance, local aid and eligible renovation support can improve a buyer’s result. They depend on acquisition-date rules, income, location, first-time-buyer status and the work undertaken. No such entitlement is assumed here; a personalised calculation must add both the eligible aid and the associated spending. Rental-investment incentives cannot simply be claimed on an owner-occupied home.
In 2006 euros
Consumer prices in France rose 46.4% between January 2006 and June 2026 (harmonised index). In January 2006 euros, the buyer's €278k is worth €190k, the PEA €390k and the Livret A saver's €190k only €130k. The savings result includes continuing contributions; it is not the return on a one-off deposit. A tax exemption protects interest from tax, but does not guarantee that it will keep up with inflation.
Where buying comes out ahead
Buying came out ahead of renting and saving in all the tested rent, upkeep and purchase-year cases. With a hypothetical constant 3% annual stock return, it also beats renting and investing: €277,604 against €215,702 after the modelled taxes. That lower-return scenario uses the same historical housing prices and cash flows. Buying also led the historical stock-investment path in many months of 2007-2013.
In February 2009, the renter’s portfolio was 35% below the buyer’s equity; contributions still had to continue during the crash. A renter who stopped investing then, or spent the difference, would not have reached these results.
The renter's lead shrinks quickly as the rent rises relative to the price. At 5% of the price, the renter investing in a PEA ended at €444k against €279k for the buyer; at 3.5%, at €655k. Upkeep works the other way: at 0.5% a year the renter ended at €497k, at 1.5% at €644k, because every euro of upkeep the buyer pays is a euro the renter invests.
The decisive input is the stock market. With the base assumptions, a constant return above 5.1% a year before fund costs was enough for the renter to end ahead after tax. With rent at 5% of the price and upkeep at 0.5%, the threshold rises to 8.1% a year, close to the 8.9% the period delivered; the renter's lead in that case was €90k.
Source: sensitivity tests (CSV).
Every purchase year from 2003 to 2012 ended with the renter ahead in June 2026, by €224k to €481k after tax. They share most of the same window, so this does not test a weak decade for stocks: all of them end after a strong run for world equities and a flat decade for French home prices.
This is not ten independent twenty-year tests: holding periods differ, and the 4.1% starting rent ratio is held constant as a sensitivity assumption, rather than observed for every start year.
What the model leaves out
The model measures financial wealth and does not price housing security, flexibility or the cost of moving. The base case excludes resale costs, broker spreads, loan-guarantee or mortgage-registration fees, exceptional renovations and rent changes on moving. Its 3% sale-cost sensitivity is separate from the headline values. It uses one national price index, not one home, and assumes the same household stays twenty years.
The taxe d'habitation, paid by occupants whether owners or tenants until it ended for main homes in 2023, is left out on both sides.
This is a synthetic index-and-tax simulation, not the track record of a fund available throughout 2006-2026. It assumes an accumulating fund; a distributing securities-account fund would incur tax during the holding period. MSCI net returns already include the index’s dividend-withholding assumptions, but fund tracking differences and actual tax leakage can differ. The model is nominal and before income tax on the household's salary, which affects both sides equally.
Borrower insurance stays at 0.3% of the original loan annually; no refinancing, renegotiation or early repayment is assumed.
Practical checks
- Divide a year's rent by the asking price of a comparable home where you would live.
- Add up the yearly cost of owning: loan interest, insurance, property tax and upkeep, as a share of the price.
- Compare the two before comparing wealth projections.
- Check whether you would invest the monthly difference every month, including in a falling market.
- Check which wrapper you would use and its ceilings: PEA, assurance-vie or securities account.
- Run your own numbers through a different start year and a lower stock return than 8.9% a year.
