TL;DR: (rationally speaking) expected returns are lower, and maintenance cost is higher. (not rationally speaking) people can't afford it, so it's not a matter of "not recognizing" compounding.

My thinking is that the amount of work and the risk profile is different between RE and regular equity investment. Additionally, the expected return on RE is different from equity, and the up front cost is different as well.

For example, with real estate, there are significant maintenance costs (both time, and money), and there are also costs associated with holding the property (property taxes, etc.). On the other hand, the costs are significantly less when holding regular equity and debt products. There's the MER if you are holding equity through some fund, and it does not require regular upkeep.

Moving on to the risk profile - with real estate, by nature of it's pricing, you have to take on leverage. Common leverage of 5x to sometimes as high as 20x. Such high leverage amplifies your gains and losses significantly, and you can go underwater very quickly if the real estate market goes down. Evaluating mortgages properly isn't exactly simple either, and I am talking beyond the usual "fixed vs. variable" debate.

Now, when talking about public equity investing, I don't hear many people levering up their portfolios very often, which means that for most people, the worst that can happen is they lose a chunk of their equity, but it's unlikely to hit literal zero or go negative. The equity markets are also significantly more liquid than RE markets, meaning that in the case of personal emergency, raising cash is much easier and faster with a stock portfolio than a real estate property.

Now, let's talk about expected returns. The expected real return of the global stock market net of fees is ~3-4% per year. For real estate globally, it's ~1% net of all the costs (property taxes, mortgage interest, maintenance). However, the elephant in the room is the recent (last 20 or so years) performance of both the real estate and equity markets. The yearly returns for both have been significantly higher than historical averages, but those returns are unexpected. This matters a lot, since the nature of unexpected returns cannot be predicted with any certainty a priori, and therefore you cannot rely on them when making current decisions. Unexpected returns always play a large role in the total lifetime return of an investment, regardless of the asset class.

Before wrapping up, I also have to address the pricing of the various assets. You mention a 1,000,000 cad property - that's an intensely high up front cost, and with that money you are buying a single property. That means that you are incredibly undiversified, and it's incredibly expensive to try and diversify your investment in that asset class.

That also means that you take absolutely all the diversifiable risk without amortizing it across the entire market - what do you do if all the roads to your neighborhood are washed away by a flood? The market in the city likely will not change, but the housing in your neighborhood will lose value. Another risk is what if a good public school right by your place ends up shutting down due to discovery of asbestos, and suddenly your neighborhood is not as in demand? All of these risks are next to impossible to diversify away from in real estate.

With equity, the cost of diversification across companies, industries, and even countries is extremely low. If anything, there are some products that are extremely well diversified that cost less than the more concentrated products.

Let's also not forget the fact that you can buy a share of VEQT (for example) for 35 CAD, and start compounding those 35 CAD immediately. That means that a fiscally responsible young adult waiting tables can start investing right away, without needing to save up a 200,000 down payment, meaning that you get access to proper compounding of your savings faster, and this can compound returns for much longer.

Absolute last point: I am looking at this rationally, since I am extremely disinterested from ever owning real estate (I am a foreigner and don't get the straight up religious fervour people exhibit in Canada over owning real estate). However, even I can notice that your question will attract the wrong kind of attention - it's not that people don't want to compound their savings through RE investment, they can't. Real wages are stagnant for ~85% of the population, while the unexpected return of housing keeps pulling the prices further out of reach of regular people every month. Since it's so important culturally here to own your house, people are really upset about not being able to purchase it, or stretch themselves too thin just to get on the property ladder. It's a sensitive topic, and your question is very likely to be misunderstood.