Property Investing

Investing in Property vs Shares in Australia - 2023

Published 14th February 2023Updated 3rd April 2023

A group of real estate investors discussing investment possibilities in both property and shares

The real estate and stock markets are both powerhouses of potential to deliver big returns, but it's important to understand the differences and weigh the pros and cons.

One mistake new investors often make is rushing into purchases. We’re here to answer your burning questions, and give you the inside scoop on investing in property versus shares in Australia this year. We’re talking about the good, the bad, and the ugly to help you make an informed decision.

Let’s go!

Is it better to invest in shares or property?

While we’d love to put a definitive answer to this question, it boils down to personal choice. It will also depend heavily on your financial goals and risk tolerance. 

Some investors choose property, despite certain risks, because it suits their investment style. Others choose stocks because they have different financial or personal considerations.

Is real estate a good investment?

Investing in real estate certainly has its appeal. With a physical property that you can touch, see, and even improve, many feel they have a lot more control over this kind of investment. 

Real estate can provide a steady and reliable stream of income, as well as capital growth over the long term. Renting out your property and using it to pay off your mortgage can allow you to build equity and even expand your property portfolio.

Investing in real estate also comes with a variety of challenges and considerations. Real estate markets are often cyclical and can experience significant price fluctuations, which may impact the return on your investment. 

Purchasing a property typically requires a large upfront investment, which can be difficult to come by for some investors. Owning a property also means you'll need to take care of its maintenance and upkeep, which can be time-consuming and costly. 

Is investing in stocks a good idea?

Becoming a shareholder and buying a piece of a company means having the potential to profit from the company's growth and success. Many people prefer investing in these intangible assets because it's quicker and requires less upfront money than real estate. It also avoids the responsibilities of property maintenance. 

However, the stock market is inherently volatile and can be unpredictable, which can impact the value of your shares. Since stocks are more speculative than bonds or real estate, there is also a greater risk involved.

Before investing in stocks, it's important to thoroughly research the company you're interested in, understand the risks involved, and diversify your portfolio to minimise potential losses.

If you’re debating whether or not to invest in shares or property, here are some things to consider:

Returns: Real Estate vs Stocks

Let's talk about returns on investment (ROI) between property and shares in Australia. Real estate and stocks are two of the most popular investment options, but they both offer different returns.

Average real estate return on investment

The average ROI for real estate can vary depending on a number of factors, including the location of the property, the state of the real estate market, and an investor's strategy.

According to an Australian Securities Exchange (ASX) report in partnership with Russell Investments, the average real estate return on investment in Australia has been at 6.8% over the past 100 years.

This means that if you buy a property worth $1,601,467, it could increase in value by $108,899. The average rental yield in Australia is around 8%, with 1% accounting for ongoing costs like dues, strata and insurance fees.

In other words, for a property worth $1,601,467 you would expect an annual rental income of $128,117 and ongoing fees of $16,000, leaving you a profit of $112,117.

Average stock return on investment

It's hard to predict exactly how much you'll make on your investment. The average ROI for stocks can also vary, depending on the stock market conditions, the specific stocks invested in, and the length of time the investment is held. 

To get an idea of the overall market, look at the All Ordinaries Index. This index is made up of the stock prices for 500 of the largest companies listed on the ASX and measures their combined performance.

Research by Canstar shows that the All Ords rose from 1,582 in March 1992, to 7,323 in February 2022, with a 362% increase in market value of shares. Per year, the average total return of stocks is 9.3%, based on data by the S&P/ASX 200 Index.

The stock market can be more volatile than real estate, with bigger potential for both gains and losses in the short term.

Risks: Real Estate vs Stocks

Risk is inherent to investing. The higher the risk, the greater the rate of return an investor can expect.

Whether you prefer the stability of real estate or the potential for higher returns in stocks, it's important to be aware of the underlying risks along with the benefits. The markets may change at any minute - and it’s not set in stone how the future of these investments may go. 

Let’s take a look at some of the most common risks of investing in property vs shares in Australia:

Risks of investing in stocks

Market Volatility

  • Shares prices can fluctuate greatly in short periods of time based on market conditions, news and other external events.
  • Stock market changes can affect the overall value of a portfolio, which can lead to significant gains or losses.
  • At any given time, if there is too much supply of shares and not enough demand, their value and price will decline.

Company-specific Risks

  • Management changes, legal issues, competition, and other factors can affect a company's financial performance.
  • Company-specific risks can lead to a decline in a company's stock price and impact the overall return on investment.
  • In the case of a company that issues more debt and equity than its assets are worth, earnings will be reduced, the share value will decrease, and the dividends paid will be lower.

Industry-wide Risks

  • An industry-wide risk refers to risks that are inherent to a particular industry and can affect all companies operating within that industry.
  • Examples of industry-wide risks include changes in technology, new competitors entering the market, changes in government regulation, and more.
  • Industry-wide trends can also affect the demand for products and services within an industry. For example, the popularity of electric vehicles has impacted the demand for gasoline, leading to a decrease in the profits of oil companies.

Economic & Political Risks

  • Economic changes, such as recessions, inflation, or changes in consumer spending patterns, can have a significant impact on a company's financial performance and stock prices.
  • Political risks, such as changes in tax laws or trade policies, can also affect a company's financial performance. New regulations or laws may increase the cost of doing business, leading to lower profit margins for companies. This can result in a decline in stock prices.
  • Geopolitical tensions and trade agreements can impact global companies. Tariffs or sanctions imposed by one country can harm the export of goods, reducing revenue for trade-involved companies.

Property investment risks

Economic Fluctuations

  •  Changes in interest rates, inflation, and unemployment can affect real estate prices and rental income.
  • When interest rates are low, people are more likely to borrow money to buy a house, which drives up prices.
  •  When inflation is high, the cost of living increases and people may not have the money to buy a house, so prices drop.
  •  When unemployment is high, people may not have the money to afford rent, which could lead to a decrease in rental income.

Overbuilding & Oversupply

  • Too much new construction in a given area can lead to an overabundance of available properties and drive down prices.
  • Overcapitalization is a risk when property cost exceeds the potential value or rental income. For example, building too many apartments in an area with low demand can result in prices too low to cover costs, leading to financial loss for the owner.

Inflation Risk

  • Inflation can affect real estate investments by decreasing the value of rental income over time.
  • Inflation may also trigger rising mortgage rates along with development and maintenance costs
  • In the current market, landlords may need to increase rental prices to account for higher mortgage rates and supplies, which may lead to tenants being unable to afford the rental rate, leaving the property vacant.

 Specific Risk

  • This refers to the risk associated with specific properties or markets.
  • Specific risk factors such as location, zoning laws, the condition of the property or declining local economies can negatively impact real estate values.
  •  A property can lose its value even if it is a good investment overall. Due to the associated risks, a property located in a high crime area or declining economy, for example, might become a less desirable investment.

Pros and cons of property investment

Property investment has been a historically popular option for securing financial stability in Australia. Data shows that nearly 2.6 million individuals (or 10% of the population) were landlords as of 2019. 

Real estate is known to appreciate in value over time, with an average annual growth rate of 3% over the past decade. Additionally, property investment can provide significant tax benefits, with deductions available on expenses related to property ownership, such as maintenance, repairs, and interest payments on loans. 

On the other hand, investing in property also comes with risks such as illiquidity, ongoing maintenance costs, and exposure to market fluctuations, as property values can change significantly over time. Property investment also requires significant capital, which may not be feasible for some investors.

Let's look at more of the pros and cons of property investment:



Provides long-term income stream that can increase over time

Requires a significant initial investment that is much higher than what is required for stocks.

Australian property markets have enjoyed an average rise of 6.8% in property values over the years

These investments are illiquid and inflexible, meaning they can be difficult to sell and convert into quick cash, unlike shares.

More stable and less volatile than stocks

Property investments lack diversification and are exposed to risk from events such as natural disasters, local housing market crashes, and unexpected major repairs.

Using a mortgage can yield greater ROI than stocks when experiencing growth

The actual property value may be less than what's paid for if a proper valuation isn't done before investing.

Provides tax benefits, including tax deductions for maintenance and repairs, that can help offset investment losses.

Additional costs can arise from damage caused by tenants or ongoing maintenance requirements, which can offset any gains from tax benefits.

Minimal research or knowledge needed to invest

Property investments can be hindered by mortgage payments if interest rates rise, extended vacancy, or inadequate rental income.

Pros and cons of investing in stocks

The pandemic triggered a wave of people looking at investment options to sustain their future. In fact, the ASX saw a major upsurge in activity, with 435,000 individuals making their first-ever investment in stocks, and a new record of 1.25 million active investors by the end of 2020. 

Stocks were particularly appealing, thanks in part to the rise of online brokers. Investors could easily tap into an entire market brimming with wealth potential from the comfort of their homes.

While it can seem like a sure shot, there are also risks associated with investing in stocks. Stock prices are known for their volatility and can fluctuate rapidly, resulting in less experienced investors losing a lot of money very quickly. 

The stock market can also be influenced by many factors, such as economic conditions, company performance, and political events, making it difficult to predict and navigate.

Let’s take a look at some of the pros and cons of investing in stocks:



High potential for high capital gains and income from dividends.

Recent research found that shares grew by 9.7% a year and the average dividend yield is 4.1% - twice the world average. The volatile nature of the market makes it difficult to confirm the profitability of most steps you take.

It's easy to buy shares through a broker or online trading platform, which offers investors flexibility and convenience.

It can be hard choosing an option that you are completely comfortable with due to the sheer variety of share investment options available.

Tax benefits, such as the ability to use losses to reduce your taxes, and enjoy franking credits (or tax credits that reduce your income tax).

Falling shares can stress you out, especially if you don't know why it happened. You need  to pay a fee every time you buy and sell shares, with brokerage fees starting at around $20.

Share markets like ASX offer high liquidity and low transaction costs, allowing for easy buying and selling of shares. Cash settlement typically takes 3 days.

Shares represent ownership in a business, but they are not physically held. You don't have control over the business and directors can issue more shares, diluting the value of existing shares.

The ability to diversify your portfolio easily and invest across a range of companies, industries and even countries, minimizing your risk exposure.

High chances of losing your cash if you’re too invested in only one sector of the industry.

Shares require less time and energy compared to property investment. After setting up a brokerage account and researching companies, monitoring a few reports regularly is enough. ETFs also offer low management fees and diversify shareholding in one trade.

The share market may crash from time to time, which cannot be foreseen even by the wisest expert. Share markets do recover, but they may take months or years to go beyond a previous high. Even so, there are no guarantees that all individual share prices will rise again.

The investment landscape in 2023

Traditional investment practices in Australia have changed.

For the real estate market, pandemic-triggered low interest rates resulted in higher overall property demand over the last 2 years. 

Property values are now 20-30% higher than at the beginning of this cycle when wage growth was mostly minimal to moderate. This means that more people may not be able to afford property. 

The pent-up demand for buying a property seems to be waning. Many have had to delay their plans of moving for so long due to the pandemic, that they are now less eager to jump into action and actually purchase a house. 

More people have shown an interest in moving out of cities and into detached houses. There may be higher property demand in regional areas and investors looking for a more pandemic-friendly home.


The share market, on the other hand, tells a different story.

The entry of Omicron in 2022 has disrupted the market's recovery, casting uncertainty on how much companies may be able to recoup. With staff shortages, supply chain breakdowns, and higher inflation, it seems like the already risky tower is becoming even riskier. 

Sell-offs are becoming more common as companies find it harder to justify their valuation with the spike in interest rates. High dividends may still be paid out, but not to the record level that was reported in August 2021. 

Market analysts predict that the market will keep rising, but at a slower pace than 2021. The low interest rates are expected to bring back a surge in stock investment.

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Disclaimer: The information provided on this blog is for general informational purposes only. All information is provided in good faith; however, we do not account for specific situations, facts or circumstances. As such, we make no representation or warranty of any kind whatsoever, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information presented.

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