What Nobody Tells You About Shares vs Property
Most Australians think shares are “risky” because of daily price swings. But zoom out, and you'll see a different story. Explore the data yourself.
Daily volatility
Yearly volatility
Property implied P/E
What Do You Actually Own?
Many people think shares are just “paper” while property is “real.” But owning a share means owning part of a real business with real assets, employees, and income.
Owning 1 CBA Share
You become a part-owner of:
800+ branches
Physical locations across Australia
45,000 employees
Working to grow your investment
$1.1 trillion
Assets under management
Quarterly dividends
Cash paid directly to you
Diversification bonus: Buy 1 ETF and you own 200+ businesses across every sector of the economy.
Owning 1 Investment Property
You become an owner of:
1 property
Single asset in one location
1 suburb
Concentrated geographic risk
1 tenant
Income depends on one person
Concentration risk: If that suburb declines or your tenant leaves, your entire investment is affected.
The Key Insight
A share isn't just a ticker symbol on a screen. It represents real ownership in a real business. When you buy CBA, you're buying a piece of every branch, every employee's work, and every dollar they earn. Property feels “tangible,” but a share is ownership too — just more diversified.
The Power of Zooming Out
“Shares are too volatile!” — This is what most people say. But volatility is a function of how often you look. Watch what happens when you zoom out.
Daily View
Daily volatility
😰 “This looks terrifying! The price jumps around constantly!”
Yearly View
Annual volatility
😌 “Actually, the long-term trend is clearly upward.”
The Key Insight
Property prices also move daily — you just don't see a ticker. If houses had real-time price feeds, property would look just as “volatile.” The difference isn't the asset class — it's how often you check the price.
Real Companies, Real Data
These are companies you interact with every week. See what it means to own a piece of them.
Different Industries, Different Metrics
Not all businesses are valued the same way. A bank and a mine have different drivers. Here's what matters for each sector.
Banks
P/E Ratio
Profitability vs price
Good: 10-15x
NIM
Net Interest Margin - lending spread
Good: > 1.8%
CET1 Ratio
Capital adequacy buffer
Good: > 10%
Bad Debt Ratio
Loans going wrong
Good: < 0.5%
💡 Key insight: Banks make money from the gap between deposit and lending rates. Watch for bad debts in downturns.
Retail
P/E Ratio
Earnings multiple
Good: 15-25x
Same-Store Sales
Growth at existing stores
Good: > 2%
Inventory Turnover
How fast stock sells
Good: > 8x
Gross Margin
Profit after cost of goods
Good: > 25%
💡 Key insight: Retail is defensive - people always need groceries. Watch for competition from online players.
Mining
EV/EBITDA
Enterprise value vs cash profit
Good: 4-8x
Reserve Life
Years of resources left
Good: > 15 years
AISC
All-in sustaining cost per unit
Good: Below spot
Payout Ratio
Dividends from profits
Good: 50-80%
💡 Key insight: Mining is cyclical - profits depend on commodity prices. Big dividends in booms, cuts in busts.
REITs
FFO Yield
Funds from operations yield
Good: > 5%
NAV Premium
Price vs asset value
Good: < 10%
Occupancy Rate
Properties leased out
Good: > 95%
WALE
Weighted avg lease expiry
Good: > 5 years
💡 Key insight: REITs let you own property without the hassle. Listed REITs trade like shares - daily liquidity.
Don't Overcomplicate It
For first-time investors, you don't need to master all these metrics. An index ETF (like VAS) owns all these companies automatically. The key insight is that different businesses have different characteristics — diversification smooths out the bumps.
Property Reality Check
Property investors often don't calculate their true return. When you include all costs, negative gearing, and dependence on capital growth, the picture changes.
Property ROE Calculator
Calculate your true Return on Equity, including negative gearing
Property & Finance
Annual Expenses
Your Tax Rate
LVR
80%
Gross Yield
4.2%
Net Yield
2.3%
Annual Cash Flow
Return on Equity by Capital Growth
0% Growth
-9.0%
ROE
3% Growth
+6.0%
ROE
5% Growth
+16.0%
ROE
7% Growth
+26.0%
ROE
This property is negatively geared
You're paying $14,367 per year out of pocket (after tax benefit). Without capital growth, your ROE is -9.0%. You need >3% annual growth just to break even.
💡 This calculator shows the true return on your equity (deposit), not the property value. Many investors focus on property growth but forget their actual return depends on leverage and cash flow.
Hidden Costs Comparison
| Cost Item | Property | Shares |
|---|---|---|
| Stamp duty | 4-5% ($40,000) | $5-10 brokerage |
| Conveyancing | $2,000-3,000 | - |
| Building & pest | $500-1,000 | - |
| Strata (annual) | $3,000-8,000 | - |
| Maintenance (annual) | 1-2% ($8,000-16,000) | - |
| Insurance (annual) | $1,500-2,500 | - |
| Property manager | 7-10% of rent | - |
| Vacancy | 2-4 weeks/year | Dividends continue |
| Time to sell | 30-90 days | Seconds |
Leverage: The Double-Edged Sword
Scenario: 80% LVR property
$100k deposit + $400k loan = $500k property
If value drops 20%: Property worth $400k
Your equity: $0 (wiped out)
Same $100k in shares
$100k invested (no leverage)
If value drops 20%:
Your equity: $80k (still yours)
Leverage amplifies gains and losses. Property's high returns partly come from leverage risk.
The Key Insight
Without capital growth, many investment properties have negative returns. The “tax benefits” of negative gearing only exist because you're losing money. Meanwhile, CBA pays you 3.8% in dividends — that's positive cash flow, no growth needed.
The Perfect Storm: 1999-2020
Property's incredible 25-year run wasn't an accident. It was driven by a unique combination of policy changes, falling rates, and debt expansion. The question is: can these tailwinds repeat?
Key Events Timeline
Property investment became significantly more tax-effective. Hold for 12 months, halve your tax.
Existing homes exempt from GST. FHOG pulled forward demand and increased entry prices.
RBA slashed rates from 7.25% to 3%. Property barely dipped while global markets crashed.
Interest-only loans capped at 30%. Sydney/Melbourne cooled 10%+ from peak.
Rates cut to historic low of 0.1%. Property surged 25%+ despite recession.
0.1% → 4.35% in 18 months. Property fell 5-10% in most capitals.
Can These Tailwinds Repeat?
Then: Fell from 17% → 0.1%
Now: Can't fall below zero. Currently ~4%.
Then: Introduced 1999
Now: Already priced in. Already exists.
Then: 200-300k/year sustained
Now: Policy dependent. Can be turned off.
Then: 70% → 190% of income
Now: Near ceiling. How much more can people borrow?
The Key Insight
Property's 25-year boom was fueled by a perfect storm of falling rates, tax changes, and debt expansion. These drivers have largely exhausted themselves. Future returns may look very different from the past. The question isn't whether property is “good” or “bad” — it's whether you understand what drove past returns and whether those conditions can continue.
Bringing It All Together
This isn't about shares being “better” than property or vice versa. It's about understanding what you're actually buying and making informed decisions.
Shares might suit you if...
- You want diversification without huge capital
- You value liquidity and flexibility
- You're comfortable with visible volatility
- You prefer passive income (dividends)
- You don't want the hassle of property management
Property might suit you if...
- You have significant capital and stable income
- You want forced savings via mortgage payments
- You prefer tangible assets you can see
- You're comfortable with illiquidity
- You have time and skills for property management
Questions to Ask Yourself
What is my actual time horizon? 5 years? 10? 20?
Am I comfortable with seeing daily price movements, or will I panic?
Do I understand that property returns depend heavily on capital growth?
Have I calculated the true cost of property ownership including all expenses?
Am I relying on past returns to predict the future?
Do I understand the difference between leverage amplifying returns vs creating them?
Knowledge is Your Best Investment
The goal of this module wasn't to convince you that shares are better than property or vice versa. It was to help you see past the myths and make decisions based on data, not emotion. Whatever you choose, understanding what you're buying is the first step to building wealth.