Which is the better investment – shares or property?

property shares investment

Almost everyone understands the benefits of investing in property. However, the similarities and benefits of investing in equities compared to property are not so easily understood.

With soaring property prices, investors need to explore other asset groups to build wealth. For Australians already holding property, diversification is an important consideration to reduce concentration risk and protect wealth.

Let’s explore the age-old argument of shares vs property and look at the pros and cons of both.

Over the past 20 years, Australian shares have returned an average of 8.7% per year. Similarly, the national average for Australian residential property has returned an average rate of 10.5% for the same period.

Despite both methods showing strong returns, property remains the most common tool used to create wealth. So why the disparity in their use? The difference is largely because investing in property is more commonly accepted than investing in equities. Many investors are not aware of the potential for investing in equities as a growth asset over the long term, but it’s an option worth careful consideration.


  • Gearing can offer a tax effective way to access a growth asset – property and/or shares
  • Investment properties offer a rental return. Shares offer a dividend return and can come with franking credits, creating an additional tax benefit.
  • Gearing magnifies your profits and your losses for both property and shares, so it’s important to take a long-term view.
Minimum Investment$500REIQ median^ house price means a $63,500 deposit* + stamp duty and other property taxes
VolatilityHigh in the short-term, low in the long-term (five years or more)Lower volatility than shares
Ongoing costsNoneRepairs, maintenance, rates

What is the impact of higher property prices?

  • Higher prices also mean lower rental yields (rent amount compared to mortgage repayment amount), this means investors need to give up more of their own income to cover the shortfall for the mortgage repayments when compared to renting.
  • A large mortgage also means it takes longer before you actually own your home rather than the bank.
  • Higher property prices means it is now very difficult to save enough money for a deposit

What is the impact of low flexibility and liquidity?

Lack of liquidity in the property market means it becomes harder to exit when compared with shares. This is because of the time it takes to appoint an agent, find a buyer but also because of the agent fees involved in selling a property. This means that investors usually have to commit to paying off a long-term mortgage with ongoing minimum monthly payments. Therefore, property is often restrictive for those who plan to travel or take out other commitments that require more flexibility.

Feel that shares are too complicated?

Stock picking can be tricky. Fortunately, investors can gain access to share funds that are managed by professional managers and the rise of exchange-traded funds (ETFs) has made share investments much easier. Investors can easily gain exposure to a diversified portfolio of shares – basically a basket of different shares.


There is no winner or loser in this comparison – there never has been and never will be – the simple fact is that both shares and property are growth assets and both should form part of most people’s portfolio.

How much of each should be in your portfolio? is the better question and this is where we can assist you.

Call Ian today to arrange a meeting to discuss how we can help design your investment portfolio…after all, it is all about your financial design!

^ https://www.domain.com.au/news/brisbane-median-house-price-hits-record-high-reiq-20160921-grl7ks/

based on a 10% deposit.

Source: content edited and reproduced with the kind permission of Leveraged (a subsidiary of Bendigo & Adelaide Bank)

Ian Chester-Master is a Certified Financial Planner and a Director of Your Financial Design P/L.  You can contact Ian on 0412 579 679.

Your Financial Design Pty Ltd is a Corporate Authorised Representative (1233744) of Madison Financial Group Pty Ltd | AFSL No. 246679 | ABN 36 002 459 001

General Advice Warning

Before acting on any information in this article, we recommend that you consider whether it is appropriate for your circumstances.  You should not act on any advice until we have fully considered your personal circumstances and provided you with a Financial Services Guide, Statement of Advice and Product Disclosure Statement/s.