Property vs Shares: Which is the better investment?

There are alternative investment options out there (perhaps you've sat there awkwardly agreeing with the wildly gesticulating Uber driver explaining why every cent you have should be tied up in cryptocurrency), but most people looking to grow their money look to shares or property. There are benefits and drawbacks to investing in either, and at any given time, one could be outperforming the other. But if you're deciding between shares or property as an investment, there are general principles about both assets you should understand.

How does property investment work?

Property investment is pretty much as straightforward as it sounds. You buy property and rent it out, then all going to plan, its value flies up. When the time comes to sell, you make a hefty profit.

In Australia, property investing is particularly popular because of the consistently strong property market and rather accommodating tax policies for landlords, especially around negative gearing. When rental income works out to be more than what the property is costing in mortgage repayments and other expenses, you can pocket the remainder as income each month. Investors call these properties 'positively geared'. When there is a deficit, and you need to make up the difference each month, this is known as negative gearing. These losses can be claimed in Australia against other taxable income, which can make property investing far more lucrative than in other nations without these tax benefits.

However, property investing can also be a lot of work. As a landlord, you have a responsibility to your tenants to ensure the property is liveable, and you also need to make sure it's being looked after properly. You'll likely either need to manage the property yourself, which can be very time consuming, or hire a property manager, an additional expense. It's even worse should you not have a tenant: if your home goes unoccupied for an extended period, the lack of rental income could put you in serious risk of being unable to make your loan repayments

Property is a non-liquid asset, which means you generally can't sell quickly if you need cash. It's also pretty hard to sell it fractionally - it's generally all or nothing.

Property investing in 2025

Over the past couple of decades, property prices have risen remarkably throughout Australia. As of September 2024, property prices were on average more than five times more expensive than in September 1997, dwarfing the equivalent growth to both wages and inflation. As you might expect, home ownership rates have fallen, but perhaps not as much as you'd think - in 2019/2020 just over 66% of Australian households owned their home compared to 71.5% in 94/95, according to the ABS.

After a short and shallow downturn to start the year, as of May 2025 property prices in Australia are growing once again. The national median dwelling price at the time of writing is $825,000 (an all time high) with every major city seeing prices increase from February to April. With further RBA cash rate cuts looking likely, prices could continue to swell through the rest of the year and beyond.

How does investing in shares work?

Equity markets can seem much more complicated than they actually are. Basically, one of the main ways businesses raise capital is to sell shares, which are effectively a tiny percentage of ownership in the company. Customers buy the share to own this small fraction, and the money goes to the company. Ideally, they make good use of this money, the value of the share goes up, and everyone wins. Once shares are issued, they can then be bought and sold on the second hand market (the Australian Securities Exchange or ASX), which dictates their value. If a share is in demand, its value goes up, whereas shares that many investors are selling lose value, like any commodity. Buying and selling shares generally incurs a brokerage fee, typically a small percentage of the sale price.

While many people buy shares for the potential capital gains, they can also generate income through dividends. Companies sometimes distribute some of its profits back among shareholders, a payment called a dividend. There is no obligation for companies to do this, but it can make shares more attractive to potential investors. If a company is distributing too much of its profits out as dividends though, it might not be reinvesting the money into the business, which could mean its growth stagnates. Investors like to differentiate between dividend shares and growth shares.

Buying units in Exchange-traded funds (ETFs) are an increasingly popular way to invest in equity markets. An ETF is a fund managed by professionals that contains a portfolio of different shares or other assets, diversifying and minimising exposure to any one stock.

Traditionally, a stockbroker executes these trades on behalf of the investor. These days though, there are plenty of investment platforms like CommSec or Raiz where you can can make these trades yourself.

Investing in shares in 2025

In February 2025, the ASX 200 (a composite index of the biggest companies listed in Australia) hit an all time high of over 8,500 points. Since then though, uncertainty over global trade saw a steep decline, bottoming out around 7,300 in April. There has been something of a continued recovery since then, but as of May it was still down from the peak.

It's a bit short sighted to look purely at the short term though. In a December 2018 speech, Reserve Bank of Australia (RBA) head of domestic markets Marion Kohler pointed out that $100 invested in the Australian share market in 1900 would be worth an inflation-adjusted $100,000 today. That's despite numerous notorious share market crashes over that time, including the Great Depression of the 1930s, the Tech Wreck of 2000 and the Global Financial Crisis (GFC) of 2007-2008.

Property investment vs the share market

Upfront costs

Many people find the biggest hurdle to breaking into the property market - as an owner-occupier or investor - to be saving up a deposit. While some lenders might grant you a home loan with a deposit as small as 5% of the purchase price, a general rule of thumb is to aim for a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI). A 20% deposit at a median priced home ($825,000) works out to be $165,000, prohibitively expensive for many Aussies.

Research from REA Group in late 2024 found it would take someone on an average salary 5.6 years to save up enough for a 20% deposit on an average home.

On the other hand, it's never been cheaper to invest in equity markets. Some investment apps allow trades as little as $100, with the only extra expense being brokerage fees, which are typically a small percentage of the sale price.

Diversification

Unit cost means it's generally far easier to diversify when investing in the stock market. The most expensive share prices on the ASX tend to be around $300 per share. If you invested $100,000 into the share market, you could spread your exposure across a wide range of companies and sectors. if you are looking to buy an investment property, $100,000 might just be your deposit. Over time, you might end up owning several investment properties, and diversify that way, but particularly for investors who are just starting out, the share market is the easiest way to ensure all your eggs aren't in one basket.

Liquidity

Liquidity refers to how quickly and easily you can convert your investment into cash.

Real estate is generally considered illiquid, because of how long it can take to sell a property. You need to find a buyer, go through negotiations, and then the process of conveyancing to officially transfer ownership. The sale process can take weeks or even months to complete, which limits how quickly you can acess your money.

The share market offers high liquidity. Stocks can be bought and sold on stock exchanges, giving investors the ability to convert their investments into cash relatively quickly. With online trading platforms, you can execute trades within seconds, allowing you access to your funds within a couple of days at most.

Volatility

Property tends to be less volatile compared with the share market. Property prices typically experience more stable, long-term growth with less frequent and significant price fluctuations. Real estate markets can be influenced by factors like local supply and demand dynamics, economic conditions, and government policies, but generally don't go up and down as much as the stock market.

Shares on the other hand are inherently volatile. Market sentiment, economic indicators, geopolitical events and company-specific news can all cause sudden and substantial movements, upwards or downwards, to share prices. This can mean more opportunities for investors, but also more risk.

Leverage

One of the major advantages of investing in property is you can borrow a far larger amount than you have saved to invest immediately. While it's possible to take out a margin loan to invest in the share market, interest rates on margin loans are typically significantly higher than on home loans and the loan sizes tend to be much smaller than home loans.

After you've begun paying off the loan, you build up equity in your home, which could potentially be used to purchase more homes and expand your investment portfolio. While you might be able to borrow some money for your share market investments with a margin loan, you generally can't leverage your existing assets to invest further to the same extent.

Income

Both investment properties and shares have the potential to generate income. Neither rent nor dividends are guaranteed, but can be a great source of passive income if your investment does generate income on top of whatever capital gains you manage.

Returns

Over the ten years to December 2024, CoreLogic Research found on average property returned 132.6%, compared to 126.4% for equities, so it's reasonably close in the recent past although property takes it.

However, research from the Reserve Bank of San Francisco suggests that zooming out hands the edge to the stock market. It found an 1870 investment in the ASX would on average have earned 7.8% each year to 2015, whereas an equivalent investment in housing would have returned 6.3% annually.

Assessing the historic returns of these respective investments can be a bit misleading because it's easy to find a time-frame that suits whichever side you're arguing for with both asset classes going through booms and busts.

Which is the better investment?

So we come to the ultimate showdown - what's the better investment between property and shares?

Savings.com.au asked experts from both sides of the fence to argue the case for one or the other.

Why it's better to invest in property than equity markets

"If someone's only got $15,000, you're probably not looking at property anyway because you're probably going to buy a subpar property which isn't going to perform well, so you may use shares and equities just to put your money somewhere…so you can try to beat inflation.

"However, once you've got to the point where you've got say, $35,000 plus, that's where I think property trumps shares hands down.

"The power of property comes from leverage. An equities guy is going to say, 'oh you can still leverage in equities and shares' which is correct, but nowhere near the same leverage and with the same resources.

"Someone with $35,000 plus can actually go out and buy a $300,000 property, so like a small townhouse or a little house in a regional town, and it's leveraged at 90% so any growth they get is going to be magnified ninefold.

"If you buy shares at 0% leverage, you might get a 10% return, but getting say a 5% return on $300,000 actually ends up giving you an extra fix.

"You can also supplicate equity from renovation, development, or just sprucing up the property.

"If you buy in a tightly held area, people are always going to need somewhere to live."

-Steve Palise, Founder and Director of Palise Property

Why shares are a better investment than property

"The main advantages [to investing in shares] would be, first of all, the size of the investment at the start…shares you invest as little as $1 effectively and be on that investment journey straight away. You can also have an auto-invest feature in your app, or the way you invest, so that you put in $20 or $30 a week or whatever it might be, whereas in property you've got to have that big chunk of change the start.

"Diversifying and spreading the risk amongst multiple companies is very easy and you can also access global markets rather than just buying the house around the block.

"Managing your portfolio is relatively easy and cheap, whereas managing a property can be time consuming and costly.

"The biggest plus is liquidity…selling a house might take a month or two, whereas selling shares is instant….trading apps have commoditised the whole process, made it a lot more efficient, so you don't even need to talk to an advisor.

"If you're new to investing, an ETF on the ASX 200 or the S&P 500 or the Dow Jones or whatever it might be would be a great way to start…you're investing in something that over time, will do well, as history has shown, without the need to really contemplate 'do I buy Apple or Nvidia or Microsoft or whatever it might be'."

-Greg Boland, Chief Strategy Officer at Tiger Brokers

Savings.com.au's two cents

And the winner is…it depends.

If you don't have a lot of capital, you might not be able to buy property yet, so the share market can be a great way to get started, earning valuable experience. You can diversify across a number of companies or even sectors, and it's easier to access your money quickly if needs be. However, you'll need to be game enough to weather the storms of the share market which can be tempestuous - any experienced equities investor will be familiar with seeing their portfolios decline dramatically in the space of a few days.

Meanwhile, property tends to be more stable, and it's easier to use your existing equity to build your portfolio. It also requires a much larger amount of capital, and the rate of return, particularly in the short term, may lag behind that of the share market when the economy is booming.

There's no correct answer regarding what's right for you. The one thing that is consistent though is that if you do decide to enter either market, do so armed with enough knowledge to make informed choices.

Photo by Hermes Rivera on Unsplash

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