Shares (ETF’s) or Property: Which is the best investment?

One of the most common questions we get asked as Financial Planners is “Which investment is better: Shares (ETF’s) or Property?”.

Like most questions in Financial Advice – the answer is; it depends on your individual circumstances and goals.

However, as the table below illustrates, we can help clearly articulate the differences to assist in your decision making.

Note: in the ‘shares’ example, we are considering a highly diversified ETF like the Vanguard High Growth Index ETF. An ETF is a managed fund which is sold on the stock market. An ETF is a type of investment which includes a range of underlying investments. Where the tables have been highlighted green, it indicates this type of investment is more favourable for the given criteria.

	Shares (ETFs)	Property
Past Performance:	Using the Vanguard High Growth Index ETF, it’s past 5-year average return is 12.31% per annum (to 30 Sept. 2025). However, when we look at the older managed fund version (i.e. not sold on the share market), its longer-term (and more realistic) performance across 23 years has been 8.91% per annum which is made up of a 5.36% dividend yield and 3.55% capital growth.	When you buy an individual investment property, the performance is highly variable because you are buying only one specific investment: compared to often hundreds or thousands of underlying investments via an ETF. The primary allure of property ownership lies in its potential for capital growth. Over the past 30 years, Australian house prices have experienced substantial increases. For instance, Sydney's median house value surged from approximately $221,770 in July 1992 to $1,346,190 in July 2022, marking an increase of about 6.8% per annum. However, not all properties are created equal: Apartments and units have only grown at 4.7% per annum over the last 30 years, and in many areas growth rates of apartments have been next to non-existent over the last decade due to oversupplies of those types of dwellings. Property also receives an income yield, however these are often eroded by the many costs of being a landlord, such as agent fees, maintenance costs, body corporate fees, council rates, tenant vacancies etc.
Liquidity: The ability to access cash from the sale of the investment quickly.	ETF’s are very liquid. Most of the time you can sell them instantly whenever the stock market is open, and sell them in whatever portions you choose. Unlike property, you don’t need to sell the entire portfolio, you can sell portions.	Property is not very liquid. Generally, you have to sell the whole property (except if you subdivide). Secondly, when you decide to sell, it can take many months to get the house ready for sale, move on any tenants and then receive the settlement proceeds.
Diversification: The spread of investments that you hold, which reduces the risk.	ETF’s are highly diversified. Using the Vanguard High Growth Index ETF as an example, it has approximately 19,000 underlying investments and a total fund size of $12,934 million dollars. This means that it does not have unsystematic risk – i.e. the risk of an individual specific company/holding, but rather it only has risk if the wider economy performs poorly.	When buying one individual investment such as a property, there is no diversification. If you buy a poor investment property you are fully exposed to unsystematic risk and the investment could prove disastrous.
Minimum Investment: The amount of money required to initially invest.	There is no specified minimum investment amount beyond the requirement to purchase at least one share through your broker. Therefore you could start your investment journey with several hundreds or a few thousand.	There is no specified minimum investment, however in Victoria many apartment and investment properties start around the $500,000 - $600,000 mark.
Costs: The upfront and holding costs required to purchase or maintain these investments.	Many brokerages charge no or minimal fees (such as $25) for purchase orders. Index ETFs have particularly low ongoing costs. Again, Vanguard’s is only listed as 0.29% p.a.	In most cases, purchasing a property, particularly for investment purposes requires the payment of a stamp duty tax. Each state charges this differently, however it is often around 5% of the purchase price. Therefore, on a $600,000 purchase it could be around $30,000. Property also has many ongoing costs as explained in the 'past performance' section.
Borrowing Capacity:	Whilst it is possible to borrow to invest in ETF’s it does have some limitations. If you organise a ‘cash out’ against your home loan, the interest rate could remain as low as your primary residence at ~5.25% currently, however, banks typically only allow around a maximum of $100,000 unless you show evidence for what you are using the funds for. If they assess it as for investment purposes, the rate will likely be higher. If you do not have a primary residence to use as security, margin loans are currently incurring interest at around ~9% which makes the strategy very challenging considering the long term rate of return on the portfolio is likely to be around that figure.	Undoubtedly the best part about purchasing an investment property is that banks will allow you to borrow a substantial amount against the value of the property and, the interest rate is using pretty competitive – currently around ~5.5% per annum when purchases personally. Let’s say the investment property makes an average rate of return of 8% (capital growth and rental yield combined), but the interest cost is only 5.5% per annum: this means you are on average making an extra 2.5% per annum by using the banks money and converting it into a higher rate of return. This is the major benefit of using leverage to buy property. However, it’s important to note that if the property is for instance purchased in an SMSF, the interest rate may be substantially higher and it could make the strategy unattractive. It's also important to note that this strategy requires you to purchase a property with strong investment return potential. If you don’t know how to buy good investment properties you should consult with a qualified and experienced buyers advocate.
Negative Gearing Benefits:	You can use negative gearing with any investment including ETF’s and property. Negative gearing is when the costs of the investment (including interest charges) exceed the income it earns, creating a loss. That loss can then be used to reduce your taxable income, which can lower your income tax bill.	As we discussed previously, because you can often borrow more with investment properties than with shares or ETFs, the negative gearing benefits can be higher. However, it is important to note that negative gearing is only beneficial if the capital growth rate of the investment is very high and you are in a higher marginal tax rate category.
Pricing of the Market:	The share market provides completely transparent pricing of shares and ETFs. This means they can change every hour based on market sentiment. The price is determined by the equilibrium price between what sellers are willing to accept, and buyers are willing to buy for on mass.	Property market pricing is opaque: agents often underquote, and houses are often sold off market without sale prices being listed. The price is simply determined by what someone is willing to pay on the day, and people can easily overpay or get a bargain. As the pricing is opaque, property benefits from a perceived psychological benefit: People view property as less risky. Ironically this is not the case (as we explained above) but rather, because prices are not accurately calculated and visible daily, people are not aware of changes that actually happen, and therefore they sometimes perceive it as less risky than the share market.

As we have demonstrated, purchasing both ETFs and property can be a good strategy for you depending on the circumstances.

We have deliberately not concluded which performs better because the answer really is – it depends. The long-term average of quality high growth ETFs and quality investment properties is likely around ~9% per annum net, however the key word here is: quality.

Purchasing inferior investments can lead to a much lower investment rate of return if you don’t know what you are doing.

We are happy to sit down with you and determine what could be the best strategy for you, your individual circumstances and goals:

Book Free Chat

The purpose of this blog is to provide general information only and the contents of this blog do not purport to provide personal financial advice.  We strongly recommend that investors consult a financial adviser prior to making any investment decision. The contents of the our blog does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this blog is given in good faith and is believed to be accurate at the time of compilation.