How does a property investment compare to shares?

2 min read

Comparing shares and property is an age old argument – and there is actually no right or wrong answer – it comes down to your preferences and approach to risk.

Growth investments

Both asset classes – shares and property - are considered to be growth investments. In other words, over time, a quality investment in shares or a property could generate capital growth, with some income from rent (property) and dividends (shares) thrown in for good measure.

The case for shares

Ease of entry into the share market is a big plus for equity investors. You can buy into the share market with as little as a few hundred dollars. In comparison, home and apartment prices in our capital cities could easily cost you upwards of $1 million.

The transaction costs of investing in shares such as brokerage and transaction fees are significantly lower than the stamp duty and legal fees that you’ll pay as a property investor.

Finally, with a share market investment, you could get almost instant access to your money when you decide to sell. Equally, you don’t have to sell the entire investment to get access to some cash. With an investment property, you can’t sell a bedroom to free up some cash – it’s the entire property that goes to market or nothing.

The case for property

A major appeal of owning a property is its perceived stability relative to the share market, where values can vary wildly from day-to-day as a consequence of how easy it is to buy and sell shares. If you’re approaching retirement, this level of volatility may not be for you.

A property investment, on the other hand, gives you a tangible asset that can deliver a sense of investment security as well as some capital growth and income.

Property buyers have the ability to fix the interest rate of a loan, which is another valuable security measure. This means that your mortgage repayments will be set for an amount of time, which could be a good option for someone who prefers stability.

Holding an investment property in a Self-Managed Super Fund (SMSF)

It is possible to set up an SMSF primarily to invest in residential property, but be aware, some rules apply to ensure your fund remains compliant. ASIC’s Money Smart website lists the following rules:

  • The property must meet the 'sole purpose test' of solely providing retirement benefits to fund members

  • The investment property can’t be acquired from a member or related party of a member of the SMSF

  • The property can’t be occupied by a fund member or any fund members' related parties

  • The property must not be rented by a fund member or any of the fund members' related parties

For more rules relating to buying an investment property through a SMSF, see ASIC’s Money Smart webpage on self managed super funds or talk to your BT Adviser. 

Need help understanding the pros and cons of property and shares? Contact us to arrange to speak to a BT Adviser
"Why salary sacrifice? Well, because it's a way of enjoying great savings by paying less tax. Want to know how it works?
No matter what special abilities you have, one of the most important skills every young professional needs to master is connecting with others in their industry.
Stage of life 15 Aug 2016
The key to a ‘renovate and flip’ strategy for investment properties is knowing what improvements to make, to generate a return. We show you how.
2 min read
Stage of life 15 Aug 2016
Property is one of Australia’s favourite investment classes. A quality, well-located property could deliver decent long-term capital growth and income yield.
4 min read
Stage of life 15 Aug 2016
We show you how to find the ideal investment property that could deliver both capital growth and decent rental income to finance your post-work lifestyle.
2 min read

This information is current as at 15/08/2016.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.

This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.

Westpac Banking Corporation ABN 33 007 457 141, AFSL number 233714.