Performance Varies by Period
- Different time periods produce different results. Property outperformed shares from 2012 to 2022 in many capital cities. Shares outperformed property through the 2000s tech boom.
- Neither asset class delivers consistent returns every year. Both experience periods of flat or negative growth.
- Past performance does not guarantee future results for either asset class.
Leverage Return
Leverage Risk
Leverage works both ways. If the property falls 6% in value, you lose 30% of your deposit on paper. And you still owe interest on the borrowed amount regardless of the property's performance.
Liquidity Comparison
For investors who value flexibility and the ability to access their money quickly, shares offer a significant advantage. Property transaction costs of 5-7% make frequent buying and selling prohibitively expensive.
Concentration Risk
Property carries significant concentration risk. A single investment property might represent $600,000 or more in a single asset, in a single suburb, in a single city. Achieving meaningful diversification in property requires millions of dollars across multiple properties.
Franking Credits
Franking credits (dividend imputation) are unique to Australian shares. When a company pays tax on its profits before distributing dividends, shareholders receive a credit for the tax already paid. For investors on lower marginal tax rates, franking credits can result in a tax refund β effectively boosting the after-tax return on dividends.
Cost Advantage
A $120,000 share portfolio in a low-cost ETF might cost $100--$300 per year to hold. An equivalent property investment generates thousands in annual expenses. The cost advantage of shares is substantial.
Combined Strategy
A common approach is to build a property portfolio for leveraged growth while simultaneously investing in shares for liquidity, diversification, and passive income. The exact allocation depends on your circumstances.
