When comparing shares and property as investment options, there are several factors to consider. Shares offer advantages in terms of liquidity, as large share markets bring together a large number of buyers and sellers, making it easier to buy and sell shares when needed. On the other hand, property investment tends to have lower volatility compared to the share market, providing more stability in property values. Additionally, investing in shares allows for diversification by holding a portfolio of different businesses, while property investments focus on a specific property or properties. Ultimately, the choice between shares and property as an investment depends on individual preferences, risk tolerance, and financial goals.

The case for property

Property investment can indeed provide stability in various ways. Here’s an example:

  1. Rental Income: When you invest in a property, such as a ​residential or commercial building, you have the potential to earn a consistent stream of ​rental income. Tenants pay you regular rent, which can provide a stable cash flow. This income can be used to cover mortgage payments, maintenance costs, or other expenses, creating a stable financial foundation.
  2. Appreciation: Over time, properties generally tend to appreciate in value. While there can be short-term fluctuations, historically, real estate has shown long-term growth. This appreciation can provide stability, as it increases your property’s value, and you can potentially sell it at a higher price in the future if needed.
  3. Hedge against inflation: ​Real estate investments can act as a hedge against inflation. Inflation refers to the rise in the general price level of goods and services over time. As prices increase, the value of your property and rental income can also rise, keeping pace with or even outpacing inflation. This helps preserve the purchasing power of your investment and provides stability amid economic fluctuations.
  4. Diversification: Property investment allows you to diversify your investment portfolio. Diversification means spreading your investments across different asset classes, such as stocks, bonds, and real estate. By having a diversified portfolio, you reduce the risk associated with focusing solely on one investment type. Properties’ physical nature and their comparatively lower correlation to other assets can help stabilize your overall investment portfolio.
  5. Control: Unlike some other investment options, property investment provides you with a certain level of control. You can actively manage your property, make improvements, and increase its value. This control allows you to adapt to market changes, address any issues, and maintain stability by actively participating in the management and decision-making process.
    While property investment does have the potential for stability, it’s important to note that all investments come with risks. Market fluctuations, changes in economic conditions, and unforeseen circumstances can impact the stability of your property investment. It’s advisable to conduct thorough research, consider your financial goals and risk tolerance, and seek professional advice before making any investment decisions.

The return on residential property investment over last 30 years

Australian residential property has experienced significant growth in value over the last 30 years. According to CoreLogic, nationally, dwelling values have increased by 382% over the past 30 years, representing an average annual compounding growth rate of 5.4%. This demonstrates substantial appreciation in the value of residential properties in Australia over the long term.

Furthermore, Aussie.com.au reports that Australian house values have increased by 414.6% over the past 30 years, while Australian unit values have grown by 293.1% during the same period. This indicates that houses have shown greater appreciation in value compared to units.  Various factors, such as economic conditions, population growth, and demand-supply dynamics, can influence property value changes in specific locations.

Do nothing and leave your money in the bank

According to Vanguard’s latest newsletter by Alexis Gray, senior economist, (September 2023) based on the RBA’s cash rate, if someone had invested $10,000 in cash on 1 July 1993 and left it there for 30 years, their balance would have grown to $34,737 by 30 June 2023.

The return on shares over 30 years

Yet, despite ongoing share market volatility over the same period of time and major market downturns emanating from events such as the 2000 Dot.com crash, the Global Financial Crisis and the COVID-19 pandemic, equity markets have delivered higher long-term returns.

With an average total annual return of 10%, a $10,000 investment in the top 500 U.S. companies at 1 July 1993, when measured by the S&P 500 Total Return Index (in Australians dollars), would have grown to $176,155 by 30 June 2023. That is a compound return of 10% p.a. each year.

That’s excluding fees but without making any additional investments other than reinvesting all the income distributions received over time. if you had regularly added to the amount then the amount would have been far greater.

If you had invested into only international shares over the same 30-year period, $10,000 would have risen to $87,584. This is based on the 7.5% average annual return of the MSCI World ex-Australia Net Total Return Index over the same period.

A $10,000 investment in the Australian share market over the same time period, when measured by the S&P/ASX All Ordinaries Total Return Index, would have increased to $138,778 based on the same strategy of reinvesting all the income distributions. That represents a 9.2% per annum average annual return over the 30-year period.

The 5 key differences between shares and property


Shares have a significant advantage over property in terms of liquidity. Large share markets like the ASX bring together a huge number of buyers and sellers in one place, creating incredible liquidity. Transaction costs to buy and sell are low, and settlement occurs quickly with what’s called the ‘T+2’ (trade date plus two business days) settlement process. If you need to sell shares, the cash will be in your account within three days.

2. Is it tangible

A tangible investment is something physical that you can touch. Property is clearly the more tangible investment. You can drive past your investment property (and occasionally paint it!), but you’ll never hold your shares in your hands. Not only is property tangible, but you can also make it more valuable through renovations. That costs more money that people don’t consider and add to the calculation of the returns.

3. Tax efficiency

One of the popular appeals of investing in property is that it can be negatively geared. What does negative gearing mean? This means the interest expenses and other costs of holding an investment property exceed the income it generates in rent.

In Australia, tax is levied on income and capital gains, whether earned through property or shares. In each case, you can also claim deductions for costs associated with the investment.  With shares, the tax advantage is franking credits on dividend income. When a company pays dividends out of after-tax profit, it has already been taxed on its earnings. Investors get credit for this through franking credits that can offset the tax payable by the investor on the dividends.

4. Low touch management

Regarding how much effort is involved, investing in shares sits at the passive ‘hands-off’ end of the spectrum. Once you make the initial investment, ongoing involvement is optional. On the other hand, an investment in property tends to be more ‘active’. Compared to a share portfolio, investment properties can be a lot of effort!

If you’ve ever owned your own home, you can appreciate just how much work is involved in keeping a property in good condition. Property investors also need to manage the tenants who will pay the rent each week or month.

The alternative is to hire a great property manager to look after the investment on your behalf. This can make the investment more hands-off but will cost a slice of your rental returns on an ongoing basis.

The final point

As you might imagine, you would expect that my bias is toward shares rather than property but we can assist you in setting up a self managed super fund to invest in either if that is what you would prefer. Personal finance is exactly that – personal. The right choice for you might be entirely different for someone else. In the debate between shares vs. property, the choice ultimately depends on your needs and goals.

If you value tangible assets, can dedicate time to actively managing your investments, and don’t mind a lack of liquidity, then a property investment could work for you.

On the other hand, if you value flexibility with your investments and want to diversify your assets, and you prefer the ups and downs of the market to dealing with fussy tenants, then shares could be the winner for you.

However you decide to invest your money, you must research your options to make an informed decision.


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