🧠 Are ETFs beating homeownership?

Is buying your own home still the best way to grow your wealth in 2025?

And if you don’t have family financial support, is it even realistic?

In Europe, only 28% of Millennials (25–34) are homeowners, compared to 42% of Gen X at the same age.

As more young people are priced out of homeownership, another trend is emerging: many are turning to financial assets instead, especially low-cost, beginner-friendly options like ETFs, to build their wealth.

But does this strategy really make sense?

Can investing in the stock market replace homeownership for this generation? Is it a reliable path to financial security, or just a temporary solution until they can afford their first home?

In this month’s newsletter, let’s explore how Millennials and Gen Z are redefining their approach to building wealth 🙂

Why housing prices are out of sync with incomes

Saving more isn’t enough to buy your first home anymore. Prices have grown far faster than incomes, and the gap comes from several overlapping trends:

1. Big investors are crowding in

Pension funds, insurers, and investment firms are buying more homes. Between 2012 and 2020, institutional purchases of residential housing in Europe nearly tripled.

When large funds buy more homes in a region, local housing prices rise faster than normal : about 1% more per year in affected areas. In hotspots like Berlin, Paris, Dublin, or Vienna, this effect can be even higher.

Meanwhile, individuals quickly hit borrowing limits, while institutions can leverage sophisticated financing to keep scaling.

2. Buyers stretch their mortgages

To keep up, individuals borrow for longer, increasing the total cost of the loan.
In France, the average mortgage length jumped from 13.6 years in 2001 to over 20 years in 2024.

In the UK, nearly half of new mortgages in 2023 stretched beyond 30 years, some even hitting 35 to 40-year loans for first-time buyers.

3. More households = more demand

Single-person households in the EU rose by 17% between 2015 and 2024. More households mean more demand for housing.

4. Building costs have soared

According to Eurostat, new residential construction costs climbed 52% between 2010 and 2023, driven by rising prices for raw materials, stricter energy-efficiency standards, and other regulatory and labor-related costs

The rules for buying your own home are clearly not the same as for previous generations.

So what options do Millennials and Gen Z have when traditional homeownership feels as inviting as a prison cell?

Why chase homeownership if it’s so expensive?

There are still strong reasons why so many people want to own their home at any cost, despite skyrocketing prices:

• Security: Owning your home guarantees a roof over your head : a peace of mind that feels especially important when you have a family to support
  

• Stable housing: In some areas, renting is difficult. In big cities, demand far exceeds supply; in small towns, available homes can be counted on one hand. Owning ensures a place to live without relying on the rental market.
  

• Leverage: With a mortgage, you can buy a home worth much more than your savings alone. Even a modest down payment gives you ownership of the entire property, so if its value rises, you benefit from gains on the full amount. That’s why borrowing can accelerate wealth-building
  

• Inflation on debt: Over the long term, inflation reduces the real value of debt. In other words, the money you repay in 20 or 30 years will be worth less in today’s terms, which lowers the real cost of your mortgage.
  

• Retirement safety net: With lower income in retirement, homeownership can act as a buffer since you’re free of rent payments, or you can sell your home to top up your pension.

A generational shift

Until recently, Europe’s middle class almost always saw homeownership as the foundation of wealth-building. For less wealthy households, real estate can represent up to 73% of their total net worth (compared with 47% for the wealthiest 10%, who diversify more). It’s the traditional reflex, even if it meant concentrating nearly all of one’s wealth in a single asset class: real estate.

But since 2020, a clear trend has emerged: more and more young people are choosing to invest in financial markets. Several forces have converged to make investing more accessible: financial education spreading on social media, simplified processes through online brokers, and savings accumulated during COVID lockdowns that made many wonder how to put their money to work.

• Since 2023, 11 million new retail investors have entered European markets.

• In France, 2.2 million people started investing between 2022–2024.

• In Germany, about 3.2 million since 2023.

• In the UK, the share of 18–24-year-olds investing jumped from 19% in 2020 to 29% in 2022.

And another striking shift: between 2020 and 2024, the share of ETFs in assets under management in Europe climbed from 8.6% to 29.66%.

The pleasant surprises

Even if high real estate prices are pushing many young people toward the stock market by default, they’re discovering plenty of advantages in building wealth this way, since it’s :

• More accessible: You can start small, no need for a five-figure down payment.
  

• More liquid: Selling investments to withdraw funds takes just a few clicks and a few days, unlike selling a property, which can take months.
  

• More flexible: While consistency is recommended, you can pause contributions, redirect money to other projects, or move cities without being tied down by a mortgage. By contrast, concentrating all your capital in a primary residence can drastically reduce your financial flexibility. That’s why the term “house poor” exists : to designate people that own their home, but have so little left over that they can’t really invest or absorb unexpected expenses.
  

• Diversified: Buying a home often means putting nearly all your money into a single investment. If that local market suffers, your whole wealth takes a hit. By comparison, a diversified index ETF spreads risk across sectors and regions by investing in hundreds or even thousands of companies. If some struggle, others can balance it out, lowering overall portfolio risk.

• Good long-term returns: Over the long term (10+ years), financial markets have historically delivered 7–9% annual returns after inflation, versus 4–6% net per year for real estate. Of course, past performance doesn’t guarantee future results, but it’s a useful guide for long-term horizons.

• Lower fees: Transaction fees and annual management costs are very low (especially for index ETFs) compared to the many expenses linked to real estate: notary fees, agents, maintenance, taxes, interest, insurance, and so on.

Together, these factors explain why more young people are choosing to invest in financial markets, even if many still hope to buy their home someday.

A mindset shift?

Beyond the practical advantages, this might signal a deeper cultural change. Where older generations saw property as the ultimate symbol of success and stability, today’s youth seem to value freedom and adaptability.

Why tie yourself geographically when work is increasingly flexible? Why concentrate all your wealth in one home when you can spread risk across thousands of companies worldwide?

Maybe this trend is revealing something more profound: that younger generations are redefining what it means to “build wealth”. With flexibility and diversification at the core.

Truth is, we’re not playing with the same cards as past generations, especially when we see the growing disconnect between property prices and incomes.

But we do have advantages, previous generations didn’t: democratized access to investing, information widely available online, easy-to-use technology, and low-cost financial products that actually perform well.

What do you think?

Did you start investing because homeownership felt out of reach?

Since discovering the flexibility of financial markets, do you now see this as your main path to building wealth, rather than traditional homeownership?

Feel free to hit reply to this email, I read every response 🙂

Take care,
Nessrine

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Investments in financial markets involve risks of capital loss. This newsletter is for educational purposes only and does not constitute personalized investment advice.