Investment returns in 2026: comparison to decide whether to buy or rent

Why investment returns matter so much in 2026

In 2026, investment returns are one of the decisive inputs when you ask whether you should buy or rent. In our simulator, this appears as the investment rate parameter (taux de placement): the average annual return you expect on your savings (cash, bonds, ETFs, etc.) if you stay a tenant instead of locking your capital into a home purchase.

This investment rate must be compared with several key 2026 real‑estate parameters:

• Mortgage rate: around 3.6% over 20–25 years for solid borrowers.
• Annual inflation: roughly 2–3%, which erodes the real value of your savings.
• Annual rent increase: linked to inflation indexes, often close to inflation over the long term.
• Property price growth: highly local, in some cities below what diversified financial investments can deliver.

The core of the 2026 "buy or rent" question becomes: can your net investment return beat the real cost of a mortgage and the implicit return of owning property?

Defining the investment rate in 2026

The investment rate used in a simulator like buy-or-rent.net is an average annual return, typically expressed net of management fees but before your personal taxes (you should adapt for your own tax situation). In 2026, typical ranges are:

• Savings accounts / money market: 2.5–3% gross, often low risk but easily eaten up by inflation.
• Capital‑guaranteed life insurance funds (euro funds): 2.5–3.5% gross, maybe ~2% net after fees and tax for many savers.
• Global equity ETFs (long term): expected 6–8% gross per year, but with short‑term volatility and negative years.
• Real‑estate funds / REITs / SCPI: 4–5.5% gross yield, with entry and management fees.

In the simulator you can test, for example:

• Conservative rate: 2.5–3% per year, very low risk profile.
• Balanced rate: 4% per year, mix of bonds, euro funds and ETFs.
• Dynamic rate: 6–7% per year, strong equity allocation.

The question is not only "how much do my investments earn?" but "how much do they earn compared with the cost of buying property?". That is exactly what the buy or rent simulator shows, year by year, using your own figures.

Scenario 1: renting and investing in 2026

Base assumptions

Consider a household hesitating in 2026: buy or rent a flat?

• Purchase price of similar property: €300,000.
• Available down payment: €60,000.
• Current rent for an equivalent flat: €1,200/month (excluding utilities).
• Annual rent increase: 2.5%.
• Average inflation: 2.5%.

If the household decides to keep renting:

• They keep the €60,000 down payment and invest it.
• Each month, any difference between a hypothetical mortgage payment and actual rent can also be invested.

Calculation with a 4% investment rate

Assume an investment rate of 4% per year, compounded annually.

1) Initial capital: €60,000 at 4% for 20 years.

Formula: Final capital = Initial capital × (1 + rate)^n

So: 60,000 × (1.04)^20 ≈ 60,000 × 2.191 = €131,460.

2) Additional monthly investing: suppose the mortgage payment would have been €1,700/month, versus €1,200/month rent. The €500/month difference is invested at the same 4% rate.

For a quick approximation using annual contributions: 500 × 12 = €6,000 per year invested for 20 years at 4%.

Future value of an annuity: Final capital ≈ 6,000 × ((1.04^20 − 1) / 0.04)

1.04^20 ≈ 2.191 so:

Final capital ≈ 6,000 × (1.191 / 0.04) ≈ 6,000 × 29.78 ≈ €178,680.

3) Total financial wealth after 20 years:

€131,460 (initial capital) + €178,680 (invested difference) ≈ €310,140.

By renting and consistently investing the difference, this household could accumulate just over €300,000 of financial assets, assuming the average 4% investment return actually materialises.

Scenario 2: buying in 2026 with limited investing capacity

Base assumptions

Now the same €300,000 property is bought, using the €60,000 as a down payment.

• Loan amount: €240,000.
• Mortgage rate: 3.6%.
• Term: 20 years.
• Notary / closing fees (older property): about 8%, i.e. €24,000.
• Agency fees: around 4%, say €12,000 (usually built into the price).
• Property tax: €1,200/year, rising by 2.5% annually.

The €60,000 down payment is used for the purchase, so there is no initial capital left to invest. Monthly saving capacity is also smaller because cash flow is absorbed by the mortgage payment, property tax, homeowner insurance, and mortgage insurance.

Mortgage cost vs investment rate

The monthly payment for €240,000 at 3.6% over 20 years is roughly €1,410/month (principal + interest, excluding insurance). Adding:

• Mortgage insurance at 0.30% of the loan amount ≈ €600/year, or ~€50/month.
• Property tax: €1,200/year, or €100/month.

Total monthly housing cash outflow is close to €1,560/month, compared with €1,200/month rent at the start (but rent will rise over time).

In return, the owner gets:

• Home equity at the end: the market value of the property (up or down) minus selling costs.
• But also significant up‑front sunk costs (closing costs, agency fees) that are never recovered.

In this scenario, investment capacity is low. The effective investment rate on residual savings might be only 2% (cash, safe instruments) because the household cannot afford to take much risk. Investment returns become a minor piece of the overall equation compared with real‑estate cash flows.

Comparing both scenarios with the buy or rent simulator

The real "buy or rent" comparison is not just about:

• mortgage payment vs monthly rent,
• or property value in 20 years.

It is also about the return on capital that is not tied up in real estate. This is where the investment rate parameter is critical in a tool like buy-or-rent.net.

Re‑using our two scenarios:

• Tenant + 4% investments: financial wealth ≈ €310,000 after 20 years.
• Owner: net home equity = future property value − selling costs − maintenance and renovation.

Assume a modest property appreciation of 1.5%/year over 20 years:

Future value ≈ 300,000 × (1.015)^20 ≈ 300,000 × 1.349 ≈ €404,700.

The mortgage is fully paid off, but we must subtract:

• Initial closing costs: −€24,000.
• Agency fees at resale (3–5%): say −€18,000 on resale.
• Maintenance and renovation (including energy upgrades, DPE improvements): e.g. −€40,000 over 20 years.

Approximate net housing wealth: 404,700 − 24,000 − 18,000 − 40,000 ≈ €322,700.

You get:

• Tenant + investments: ~€310,000 in financial assets.
• Owner: ~€323,000 in net home equity.

The outcomes are very close in this example. A small change in the investment rate (3% instead of 4%) or in property price growth (0.5% instead of 1.5%) can tip the balance either way. That is why it is impossible to give a universal, categorical answer on whether to buy or rent in 2026: it depends on your assumptions and your profile.

Choosing a realistic investment rate for 2026

1. Consider your time horizon

The longer your horizon (15–25 years), the more realistic it becomes to:

• aim for a higher investment rate via equities (global ETFs),
• while accepting short‑term ups and downs.

Over 20 years, a 5–6% annualised return is not implausible for a diversified portfolio, but it is never guaranteed. In the simulator, it makes sense to test a conservative (3%), central (4%), and optimistic (6%) scenario to see how your buy or rent decision reacts.

2. Factor in inflation and taxes

A nominal 4% return with 2.5% inflation is only about 1.5% in real terms. On top of that, income and capital‑gains taxes (e.g. flat tax, social contributions) can reduce the net rate.

Example:

• Gross return: 5%.
• Total tax drag: 30%.
• Net return: 3.5%.
• Inflation: 2.5%.

Real return ≈ 1%. So the investment rate you input in the simulator should be chosen carefully, especially if you rely heavily on taxable accounts.

3. Match your risk tolerance

If you are very risk‑averse, a 2–3% investment rate (cash, short‑term bonds, guaranteed funds) is more realistic. If you can tolerate volatility, a target of 5–7% might be achievable with a strong equity component, but with the possibility of negative years. This is not personal advice, just a general framework to think about your investment returns when you decide whether to buy or rent.

How the investment rate shapes the buy or rent decision

We can summarise the impact of the investment rate on the 2026 buy or rent dilemma as follows:

• If your expected net investment return is clearly higher than the real cost of your mortgage (mortgage rate + insurance − inflation), then the "rent and invest the difference" strategy becomes more competitive.
• If your investments yield very little (2–3%), the advantage of renting shrinks, and buying can become more attractive over the long run, especially in areas with moderate property tax and solid housing demand.

Simple 20‑year illustration:

• Real cost of debt (3.6% mortgage rate, 2.5% inflation): ≈ 1.1% in real terms.
• Conservative investing: 2.5% nominal − 2.5% inflation = 0% real.
• Dynamic investing: 6% nominal − 2.5% inflation = 3.5% real.

In the first case, the gap with the real cost of debt is small. In the second, the gap is large, and over 20 years that can radically change the outcome of a buy or rent simulation.

Beyond investment returns: other key simulator parameters

While this article focuses on the investment rate, a robust buy or rent comparison in 2026 also needs to integrate several other parameters:

• Notary / closing fees: around 7–8% for existing homes, 2–3% for new builds.
• Agency fees: typically 3–5% of the purchase price.
• Property tax: from roughly €450 to over €5,000 per year depending on the city, with annual reassessment.
• Insurance rates: mortgage insurance often 0.25–0.45% of the loan amount per year.
• Renovation costs: mandatory energy upgrades and DPE‑driven works can be tens of thousands of euros over 20 years.
• Prepayment penalties: up to 3% of remaining principal or 6 months of interest if you sell and repay early.

All these costs reduce the effective return on home ownership, just as taxes and fees reduce the effective return on financial investments. A good buy or rent analysis must put them side by side.

Use the simulator to test your 2026 investment assumptions

The most robust way to measure the impact of investment returns in 2026 on your buy or rent decision is to run multiple simulations with different investment rates:

• Conservative: 3%.
• Median: 4%.
• Offensive: 6%.

For each scenario, the simulator on buy-or-rent.net will:

• Project your future rent (with annual indexation).
• Calculate the full cost of buying: mortgage interest, insurance, taxes, notary and agency fees, likely renovation.
• Model the growth of your financial investments if you rent and invest the difference.
• Compare your net wealth over time in both cases: owner vs tenant.

By visualising these paths year after year, you can see under which assumptions renting and investing wins, and under which assumptions buying comes out ahead. The right answer to "buy or rent" will then depend on:

• your investment rate assumptions,
• your time horizon,
• your risk tolerance,
• your local market (price levels, property tax, rent dynamics).

Conclusion and disclaimer

Investment returns in 2026 are not just an abstract number in a spreadsheet: they are a key driver that can completely flip the outcome of a buy or rent analysis. A 1–2 percentage‑point difference in your long‑term investment rate can mean tens or even hundreds of thousands of euros over 20–25 years.

However, no projection is guaranteed. The numerical examples in this article are illustrative only and do not constitute personalised financial advice. Your choices should factor in your income, job stability, tax situation, family plans, and risk appetite, ideally discussed with a qualified adviser if needed.

To make your decision as data‑driven as possible and to explore different investment return scenarios for 2026, use a dedicated tool: Simulate your situation on buy-or-rent.net.