Is investing in ASX shares better than property?

With soaring property prices, are houses really a better investment than ASX shares? Here are 3 reasons why this might not be the case.
The post Is investing in ASX shares better than property? appeared first on The Motley Fool Australia. –

set of scales with a house on one side and coins or asx shares on the other

At the start of this week, the S&P/ASX 200 Index (ASX: XJO) seemed to take something of a back seat, as it is inclined to do from time to time. In its place, investors were abuzz at news out of the property market.

According to a report in Monday’s Australian Financial Review (AFR), property values rose at their fastest pace in almost 17 years over the month of February. Home values reportedly rose 2.1% over the month, and investor home loans 9.4% in January to their highest levels in four years.

According to the report, the gains put the Sydney and Melbourne property market on track to hit record highs. They also make the ASX 200, which has (as at the time of writing) ‘only’ given investors a 1.94% appreciation year to date in 2021, rather boring by comparison.

But, at risk of stoking that eternal debate, there are still reasons why ASX shares (meaning a diversified portfolio of shares) might be a better asset class to own today. Here are three potential reasons why:

ASX shares vs. property

Tax advantages

Sure, property does offer some tax breaks. While negative gearing and depreciation are certainly welcome benefits of owning property, the tax advantages of owning ASX shares are also significant. Take franking. Rental yields don’t come with a receipt entitling you to a tax refund. Yet for a fully franked dividend, you get exactly that. And if you don’t pay tax, you get that back as a cash refund.

That’s not something that is available to property investors utilising negative gearing or depreciation. Therefore, investing in shares could be a better move than investing in property from a tax perspective, depending on your personal circumstances.


It can take weeks at best, and months or even years at worst, to sell a property. The property market is highly illiquid, and selling can simply be a huge pain in the proverbial. Then, there are other transactional costs to worry about too. Between stamp duty and real estate fees, selling a house ain’t cheap.

By contrast, buying and selling ASX shares attracts no taxes (apart from capital gains of course), and brokerage costs have never been lower. Without too much research, you can find a broker that will charge you as little as $5 per trade.

In the case of US shares, it’s often free. And you are free to instantly buy or sell your shares from 10 am to 4 pm, Monday to Friday. So, in terms of liquidity, buying and selling shares is simpler and cheaper than buying and selling property.


Say an investor is about to buy their first investment property in Sydney. They will be looking at putting down a $100,000 to $200,000 deposit for a median-priced property, which is likely to be a fair chunk of their entire net worth. If they are successful, they will own a $1 million (give or take) asset, in one asset class, on one street, in one city, in one market and in one country. That’s hardly a diversified base of wealth, regardless of the investment quality.

Contrast this to ASX shares. You can buy a range of exchange-traded funds (ETFs) on the ASX that offer exposure to hundreds or even thousands of different companies with one single investment. These companies could come from dozens of different countries and be priced in a range of different currencies. And you can pick some up for as little as $500 (sometimes less, depending on your broker).

Say what you want about shares, but you can’t deny that building a diversified portfolio can be cheap and simple. In contrast, building a diversified portfolio of properties can take years, or even decades.


Volatility is one area where the two asset classes differ dramatically. Because the share market is so liquid, changes in pricing are immediately obvious. Contrast that to property prices, which are often only obvious in hindsight. Unless you have your property professionally valued, it can be hard to know exactly how much it’s worth at any given time. That can be both an advantage and a disadvantage. Equally, the liquidity and volatility that the share market brings can be both a blessing and a curse.

Some investors simply can’t stomach seeing the value of their assets move around, especially during those dreaded market crashes. In these situations, it’s not uncommon to see 20%, 30% or even 50% of a share’s value wiped out in a matter of weeks (or even days).

These kinds of moves might even provoke a nervous investor to capitulate and sell out (which, if you remember, is easy due to the liquid nature of the share market). That is often not a prudent move from a long-term perspective. If an investor can’t handle that kind of volatility, then property might be a more suitable investment for them.

Property prices are relatively stable compared to shares. Prices tend to move in month and year terms, rather than daily swings. Plus, there’s usually very little chance you can make a panic-driven snap sell that you might later regret. On the other hand, some investors enjoy the volatility that the share market brings to the table since it gives them periodic opportunities to buy shares of their favourite companies at a cheap price. The legendary share market investor Warren Buffett is famous for making big deals in the middle of market panics.

In conclusion, volatility can arguably either complement or detract from your investing efforts, depending on your temperament.

Foolish takeaway

At the end of the day, there’s no ‘right’ answer to the question ‘are ASX shares better than property’. If there was, there wouldn’t be such a strong market for both asset classes. Property offers many benefits that shares don’t – and vice versa.

The right choice for you can probably be worked out with easier questions, such as ‘how much money do I have to invest?’ or ‘am I bothered by high volatility?’. Most wealthy people have a healthy mix of both, which tells you all you need to know!

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is investing in ASX shares better than property? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!