All articles

The property-vs-shares debate gets argued the wrong way every time. People compare gross returns of unleveraged shares against gross returns of unleveraged property, conclude shares win on capital appreciation alone, and ignore the two factors that actually drive Australian investor outcomes — the leverage available on property, and the after-tax position once Australian tax rules apply.

The honest answer is not that one beats the other. It is that they do different things, suit different investors, and produce dramatically different absolute outcomes when leverage and tax are correctly modelled.

This post walks the actual maths on a $200,000 deposit deployed three different ways — leveraged property, unleveraged shares, leveraged shares — and shows why the structural answer for most Australian investors with a 15+ year horizon is "both, in different proportions, at different stages".

The Asset-Class Returns Most People Quote#

Over the 20 years to 2024, the ASX 200 total return (price plus reinvested dividends) was around 7.8% per annum. Australian residential property capital growth nationally averaged around 5.6% per annum, with rental yields adding 3.5%-4.0% gross — taking total residential return to roughly 9.0-9.5% per annum gross.

On those numbers, property edges shares before any other consideration. But this is not the comparison that matters.

What Actually Matters: Leverage#

Australian banks lend up to 80% LVR on residential investment property without LMI, and up to 95% LVR with LMI. They do not lend at those ratios against an ASX 200 portfolio.

The serviceability of margin lending in Australia caps out around 70% LVR on top-tier blue chips, and the rates are punitive (3-5% above home loan rates). A $200,000 deposit against shares with margin lending might support a $400,000 share portfolio. The same $200,000 deposit against a property with bank lending supports a $1,000,000 property.

This is the entire game. Same starting capital, vastly different exposure, vastly different absolute returns.

Worked Comparison: $200,000 Deposit, 20 Years#

Path A — Leveraged property: $1,000,000 Brisbane house at 80% LVR#

Net of CGT (50% discount, 32% blended rate): roughly $1,950,000 of after-tax wealth created.

Path B — Shares: $200,000 into ASX 200 ETF at 7.8% total return, no leverage#

Net of CGT (50% discount on capital gain, 32% blended rate): roughly $675,000 of after-tax position ($899K less original $200K, then 50% discount, then 32% × $349,500 gain = $112K tax).

Path C — Shares with leverage: $200,000 deposit, $300,000 margin loan at 8.5%, $500,000 portfolio at 7.8%#

This is more complex because dividend yield (4%) partially offsets margin interest. The net leveraged share position over 20 years, after tax and after interest, is around $1,050,000 — the leverage helps, but margin call risk and the spread between margin rates and home loan rates close most of the gap.

The leveraged property position outperforms the unleveraged share position by roughly 3:1 over 20 years. The leverage is the entire reason. The fact that property loans are 6.20% versus margin rates of 8.5% compounds the structural advantage.

Where Shares Win#

Three scenarios where shares are the right call:

Scenario 1: Liquidity needs. Shares can be sold T+2. Property typically takes 6-12 weeks from listing to settlement. If you need access to capital in under three months, property is the wrong asset.

Scenario 2: Diversification at low capital base. $50,000 in shares can buy a portfolio across 200 ASX companies and 100 international companies via ETFs. $50,000 in property buys nothing. Below $200,000 of liquid capital, property is not really an option without parental guarantees.

Scenario 3: Income in retirement. A franked dividend portfolio inside a super fund in pension phase pays zero tax on dividends and gets the franking credit refunded. The cash yield is reliable, the management is minimal, and there is no tenant management burden.

Where Property Wins (And Why)#

Reason 1: Leverage availability. Already covered. The single biggest structural advantage.

Reason 2: Tax treatment of holding losses. Negative gearing on property losses is broadly available against ANY assessable income (salary, business, etc). Margin lending interest on shares is deductible against assessable income too, but capital losses on shares can only offset capital gains, not other income. Property's deductibility is more flexible.

Reason 3: Forced saving and lifestyle inflation resistance. Property requires you to commit to mortgage payments and maintain the asset. Shares can be sold on a whim during a market panic or to fund a holiday. The illiquidity of property is a feature, not a bug, for most investors who do not have iron discipline.

Reason 4: The 50% CGT discount. Both property and shares qualify if held more than 12 months in personal name. Both lose the discount in companies. The structural symmetry is real, but the absolute size of property gains (because of leverage) makes the discount worth more in dollar terms.

The Trap: Comparing Asset Classes Without Including Time#

Property is a 7+ year asset class. Round-trip transaction costs (stamp duty, agent commission, legal) eat 6-8% of the property value. If the investor buys and sells inside three years, those costs annihilate the return. Shares can be traded weekly without comparable transaction friction.

Investors who buy property thinking it is liquid, or who buy shares thinking they will hold for 20 years and panic-sell in year three, miscalibrate the asset class to their actual behaviour.

What This Means For Your Portfolio#

The actually correct answer for most Australian investors with a 15+ year horizon is "both, in different proportions, at different stages":

Early career, low capital base: shares for diversification and skill-building, until enough capital exists for a property deposit.

Mid-career, $200,000+ of equity, stable income: property dominant, shares as a liquid sleeve. The leverage is the value.

Late career, large balance, retirement near: shift toward shares and franked dividends inside super for income and liquidity, hold property for capital growth or sell selectively.

Run your specific numbers through the Borrowing Power Calculator — it tells you whether the property pathway is even available to you. If it is, the maths almost always favours property over an equivalent unleveraged share position. If it is not, focus capital efficiently in shares until your income or savings move you across the threshold.

For the second-property comparison specifically, see our building a successful property portfolio guide. For the rentvesting alternative that uses property leverage while staying mobile, see our rentvesting guide.

Frequently Asked Questions#

Are shares more liquid than property?#

Yes, dramatically. ASX shares settle T+2 (two business days). Property typically takes 6-12 weeks from listing to settlement, plus marketing time. Liquidity matters if you need cash in less than three months — property cannot deliver that.

Do I get the same 50% CGT discount on shares as on property?#

Yes, in personal name and in trusts (where individual beneficiaries are entitled). Held more than 12 months, both asset classes get the same discount. Companies do not get the discount on either.

Can I borrow as much against shares as against property?#

No. Banks lend up to 80% LVR on investment property at home-loan rates. Margin lending against shares typically caps at 70% LVR on top-tier ASX 200, at rates 3-5% above home-loan rates, with margin call risk. The leverage capacity gap is the entire structural difference.

What about international shares versus Australian property?#

International shares without currency hedging add a currency exposure that can dominate the underlying return. Hedged products incur extra cost. Over 20 years, unhedged international shares have produced roughly 8.5% per annum in AUD terms — comparable to the ASX. The leverage gap versus property remains the determining factor.

Should I sell property to buy shares as I approach retirement?#

Possibly, but not via outright sale. Selling a property triggers CGT and stamp duty if you re-buy. A common alternative is to refinance equity from one property into a share portfolio, retaining the property and adding the share allocation. The refinanced interest is deductible if the funds are used for income-producing investment.

Want to put these insights into action?

Presm gives you the tools to model, track, and grow your property portfolio with confidence.