Should You Invest In Property Or Shares?

As an investor, a major decision you have to make is deciding whether to put your money into property, shares or other growth assets.

Both property and shares have built serious wealth for Australians over the years, but each comes with its own risks and rewards. So, understanding how these investments work is essential if you want to make the right choice.

In this article, we are going to cover some of the major factors you need to consider before you invest your hard-earned money in either property or shares.

Investing In Property Vs Shares – An Overview

Investing in property is almost a national obsession. Many Australians see real estate as a tangible and relatively stable asset. Australians prefer the safety of a house, even when house prices surge beyond affordability.

Shares, on the other hand, are growing in popularity. Platforms like CommSec and Superhero have made it easier than ever for everyday Australians to buy shares directly.

Research by the World Economic Forum shows a split, with older generations leaning heavily into property, while Millennials and Gen Z put their eggs in the sharemarket basket.

The right option for you depends on many factors, including your personal goals, time horizon, and risk tolerance.

When you buy shares, you’re purchasing a tiny ownership stake in a company. If the company’s value grows, so does your investment. You can also earn money from dividends, which are regular payments companies make to shareholders. You can leverage shares using margin loans, nab equity-builder products, etc., but these typically have margin calls, which can result in large losses.

When you invest in property, you can earn rental income or profit from capital gains if the property’s value rises. Real estate also allows for leverage: You can use a small deposit and borrow the rest.

A key advantage with property is that banks typically won’t ask for full repayment at once just because the property’s value drops, as long as you keep up with your monthly loan repayments. However, if you use a margin loan to buy shares and their value falls, you might face a margin call, requiring you either to sell your shares or contribute additional funds.

Real-estate investors can also access property indirectly through REITs (real- estate investment trusts), which behave much like shares but provide exposure to property markets.

In Short: Property demands more upfront capital and is less liquid, but offers stability and leverage without margin call risks. Shares are more accessible but also more volatile; they are more liquid, and easy to diversify.

Property Vs. Shares – What Are The Returns?

Returns are critical in any investment decision. Both the Australian property market and the ASX have delivered strong results historically, but they follow different paths.

Residential property in Australia has delivered an average annual return of around 6-7% over the past 30 years. Most gains come from capital appreciation (especially in major cities) along with rental yields of 2-4% annually.

However, property comes with holding costs like maintenance, insurance, property management fees, and taxes that can eat into returns. Although, there are tax deductibles for investment properties.

There are plenty of things that drive property returns, such as:

• Location

• Access to amenities

• Housing type

• Rental yields

The ASX, in contrast, has posted average annual returns of around 9-10% over the last 10 years, factoring in both capital gains and dividends. Sharemarket returns can swing wildly year to year, but over the decades, the trend has been upward.

Here are the factors that can drive sharemarket returns:

• Company performance
• Sector exposure

• Economic conditions

• Dividend reinvestments

Remember: Past performance is no guarantee of future results. Both markets have risks and can experience downturns.

Property Vs. Shares – What Are The Risks?

No investment is risk-free. Your job as an investor is to understand and manage these risks.

A Major Distinction

One of property’s biggest advantages is leverage. Banks often allow you to borrow up to 80% or more against a property, without demanding repayment if property prices fall, as long as you keep up your mortgage.

In contrast, borrowing to invest in shares (using a margin loan) is much riskier. If share prices fall, you could face a margin call, meaning you must either inject more funds or sell your shares at a loss.

You can also use our investment property calculator to accurately predict the weekly cashflow position of your next investment property.

Pros And Cons Of Investing In Shares

The best thing about shares is that you don’t need a huge pile of cash to start investing, which makes them an appealing option for many. And unlike real estate, shares in large, liquid companies are typically easy to buy and sell. However, if you’re investing in smaller or microcap stocks, it might be harder to sell them quickly or at market value.

You can always liquidate your shares in case of a financial emergency. There’s also more room for diversification as you can invest in a variety of shares.

One caveat of shares is that they are volatile, which leads to a more risky investment plan, especially if you panic sell. And unless you have a lot of money to invest, the returns you make from shares can be negligible.

Pros

• Low entry cost (start with a few hundred dollars)

• Can be liquidated easily

• Nominal transaction fees

• Easy to diversify

Cons

• Volatile

• Emotional investing (panic selling)

• Capital Gains Tax (CGT) when you sell

• Shares may not grow at all

• Selling shares may trigger big taxes

• Borrowing to invest increases risks (margin calls)

Pros and Cons of Investing In Property

Property investors can leverage their capital to take advantage of tax benefits. The long-term cashflow, passive income and appreciation that property investment promises makes it a worthwhile investment.

But you need to remember that property investment is not nearly as liquid as the sharemarket. Other disadvantages include the cost of property management, and the cost that goes into taxes, repairs and maintenance.

Pros

• Real estate is a tangible asset and an easy-to-understand investment.

• Using debt to buy property is safer than margin trading.

• Real estate acts as a strong hedge against inflation over time.

• Property owners may benefit from tax benefits.

Cons

• Selling property involves high transaction costs, often 6-10% of the sale.

• Real estate requires large upfront costs and is harder to sell quickly.

• Diversifying real-estate investments across locations and types requires deep pockets.

• Ongoing maintenance and management costs.

• Property values can fall, and profits are never guaranteed.

• Vacancy risks and market downturns.

Read our blog to learn more about the pros and cons of investing in our property.

So, Should You Invest In Property or Shares?

There’s no one-size-fits-all answer.

• Property offers tangible security, the ability to leverage safely (without margin call risk), rental income, and long-term growth but requires large upfront costs and is harder to exit.

• Shares offer higher liquidity, easy diversification, and potentially stronger returns, but come with volatility and the risks associated with emotional investing.

It all comes down to:

• Your goals
• Your risk appetite

• How actively you want to manage your investments

• Your time horizon

Both investments are proven paths to financial freedom but only if you align your investments with your goals, your risk appetite, and your vision.

The good news? You don’t have to navigate it alone.

If you’re ready to build wealth through property, our expert brokers can help you secure the right investment loan, structure your investment smartly, and take the first step toward a stronger financial future.

Call 1300 889 743 or get started with our free online assessment form.