Investing in property or shares in Australia

Property or shares? Both could be money-makers, or money-pits if you don’t do your own research and get proper advice before you take the plunge to invest your hard-earned cash.

Even professional financial experts do not have a crystal ball to know which type of investment strategy would grow wealth most effectively, so it makes sense to look at the hard facts. Doing your research and getting professional advice can all help you find an approach that works for you and your financial goals.

In this article, we look at the current landscape, the bare statistics and explain the key points and pros and cons around investing in property and shares. However, remember the ideas and information below don’t take your personal circumstances into account, so seeking advice before making any decisions is important. This is not a guide; this is just a starting point to get you thinking about what could be beneficial for you.

The investor landscape in 2021

A global pandemic, the booming property market, a rollercoaster share market… it’s fair to say that deciding where to invest your money may well be keeping you up at night.

And although house prices have been on the rise in major cities across Australia (a whopping 18.2% in Sydney alone in the past year), historically low interest rates and government incentives are still making property investment attractive to many. If you do decide to buy a property, it’s important to know your job and income is secure and you’re able to meet the repayments, while factoring in any potential rate rises as well.

As for shares, the ASX has seen an influx of young investors into the market. Around 27% of those surveyed in 2020 reported using an advisor, stockbroker or wealth manager in the past 12 months. The Covid-19 pandemic has also caused some shifts in how Aussies are investing: the ASX report found that many investors have responded to the crisis by diversifying their portfolio and focusing more on risk management.

Investing in property

Putting your money into bricks and mortar has long been seen as a reasonably safe route to growing your wealth. It’s an asset you can see, touch and even improve on, if you undertake renovations or bide your time while the property increases in value.

An investment property could also be used as an income stream if you rent it out, and as you pay down the mortgage, you could build equity in the property. Some investors might then consider using a portion of the equity to buy additional properties and build a portfolio. Also, one of the main questions you need to ask yourself is: should I offset or invest?

One of the reasons for this is that property isn’t the solution for everyone, as everyone has different money goals, savings goals, assets, needs and plans. So, what is the best strategy for you, and how can you start going about your research into the matter, so you know what questions to ask a professional? Here are a few things you might want to consider.

The pros of investing in property vs. shares

  • Property can be less volatile than other investments. Put simply, when an asset is more stable, it is considered less risky. When you have an asset such as a share or stock, the value changes often, so the asset could be considered riskier.
  • If you understand the market, property investment is relatively straightforward.
  • If you buy in a location where there is significant demand for rentals, the value could potentially go up, provided the rental market remains stable (which it may or may not, depending on the location).
  • Rent from your investment property can net you a constant income that covers most or all of the mortgage – as long as your property is reliably tenanted.
  • You may be eligible for a number of tax benefits, as you can offset expenses from your investment against your taxable income (from another source).

The cons of investing in property vs. shares

  • Property investment can be less flexible than investing in shares.
  • If you haven’t saved a 20 percent deposit, you may have to pay lenders mortgage insurance.
  • You have to factor in other costs such as insurance and maintenance.
  • If the property is untenanted the rental income may not cover all of the mortgage repayments or additional maintenance costs expenses.
  • If you sell the property, you may have to factor in exit costs such as agent fees and legal fees.

Investing in shares

Essentially, this involves buying shares, bonds and exchange-traded funds through the Australian Securities Exchange (ASX). Buying shares in a particular company usually you a shareholder with the potential for capital gains and entitlement to dividends.

One question that investors probably will find themselves considering is: where to invest? How do you know where your money will get a solid and stable return? Although you can do the research yourself and decide what to buy via an online broking service, you may wish to take professional advice on which shares are most likely to meet your objectives – whether you’re looking for growth or a steady income.

Brokers will charge you ‘brokerage’, or a fee, that’s either the set dollar amount or a percentage of the value of whatever you’re trading. They also charge a fee for advice.

If you invest wisely in shares you can make a significant return, but there’s also the potential to lose your investment too. Here’s what to consider about this type of investment.

The pros of investing in shares vs. property

  • There are often lower upfront and ongoing costs building a share portfolio.
  • It’s easier to buy and sell shares than buying and selling real estate, as preparing a property for sale can take time, agent’s fees cost money and settlement periods are usually several weeks (if not months). In short, you won’t decide to sell and find the cash in your pocket overnight!
  • You may get dividends and if they’re ‘franked’ you could also get a tax credit.
  • Carefully chosen shares could generate a decent return.
  • You can diversify your shares over a number of different industries.

The cons investing in shares vs. property

  • Your investments are dictated by the stock market, which can be unpredictable.
  • Any investment comes with a risk – even a supposedly ‘safe’ stock could plummet.
  • There’s a lot of choice, which can be overwhelming.
  • Staying informed can be time-consuming, so you may need to also invest in a broker/advisor.
  • It can be costly, with fees incurred every time you buy or sell.

It’s a big decision, so always consult an expert!

You should seek professional advice when considering and choosing whether to invest in property or shares, as it has the potential to significantly affect your financial position. You may want to consider factors such as having a secure job and a financial buffer for additional financial security, and having insurance in place.

It’s always best to chat to a financial adviser about your goals, your risk profile and current financial circumstances, so you can make the investment choices that work for you.

Planning for your future and considering insurance? Compare a range of Choosi policies or talk to us about your needs.


This article is provided for general information purposes only, does not consider your objectives, financial situation or needs and shouldn’t be considered or relied upon as professional or personal advice. If you have legal, tax, or financial questions, you should contact an appropriate professional.