Property vs Shares: How the Two Investment Strategies Compare

Property and shares are often presented as competing investment choices, but Andrew Baxter and Mitchell Reno argue that the better question is how the two asset classes can work together. Their comparison focuses on the different strengths, costs and trade-offs of Australian property and share investing rather than treating either one as universally superior. The figures and preferences discussed reflect the periods covered in the interview and the speakers' own analysis.1:34

The hosts stressed that affordability and accessibility are major factors, but the core message is that property and shares are complementary, not competing. Baxter described the combination as “a marriage made in heaven, ” with the stock market serving as a wealth-creation vehicle and property as a place to store that wealth.

“So many people are just one-eyed (‘I'm a property guy, I don't touch the stock market’ or ‘I'm a stock guy, I don't touch property’) you have to look at both, ” he said.27:41

Over a 25- to 30-year horizon (a reasonable benchmark given most mortgages run that long) the Australian stock market has returned about 9.6% per year on an annualized basis, excluding dividends. The US market has done slightly better, at roughly 11.5%. By contrast, Australian residential property, according to CoreLogic data, has delivered about 6.8% annualized capital growth over the past 25 years, also excluding rental income.

These raw numbers suggest shares have outperformed property on a pure capital-growth basis, but the comparison is more nuanced when you factor in leverage, costs, and inflation.2:4116:01

Inflation is the silent killer of nominal returns. Baxter pointed out that in 2023, the average superannuation fund returned 9.6%, but with Australian inflation at 6.9%, the real return was a paltry 2.5%. “On the surface you look at your account, it's grown by 9.6%, you go ‘that's great, I'm kicking goals here,’ but on a real basis you've made two and a half percent on your money, which is woeful,” he said.

The same logic applies to property: a million-dollar house that doubles in nominal terms over a decade may have barely kept pace with inflation after accounting for rising costs.11:15

One of the biggest differences between the two asset classes is the emotional experience of owning them. Shares are marked to market every second, so investors see their portfolio value fluctuate in real time. “This ability to detach yourself emotionally is very important in the stock market,” Baxter noted. “If you bought a property for $1.2 million, you don't know what it's worth every day.

There isn't a stronger emotional connection to the performance of your investment with stocks because they're literally mark-to-market live.” That constant visibility can lead to panic selling or chasing returns, which is why the hosts advocate a “time in the market, not timing the market” approach.13:14

Practical barriers also differ sharply. Shares can be bought with as little as $500, transaction costs are minimal, and you can trade any business day. Property requires a deposit of at least 5% (often 20% for investment), plus stamp duty, legal fees, and other costs that can total $50,000 to $60,000 on a median-priced home. “Stamp duty's a killer,” Baxter said. “We've both paid a fair bit of stamp duty in our time.”

On the other hand, property offers leverage: you can control a $1 million asset with just $50,000 down, amplifying returns if the property appreciates. That leverage is a powerful drawcard, but it also magnifies risk if prices fall or interest rates rise.12:4024:13

Inflation and interest rates affect both asset classes, but in different ways. For shares, higher interest rates increase the cost of capital, slowing corporate investment and consumer spending, which can dampen earnings and stock prices. Inflation tends to benefit value stocks more than growth stocks, and it also increases market volatility. For property, inflation is generally a tailwind because it erodes the real value of debt while pushing up asset prices.

“Property typically is an inflation hedge, it's a real asset,” Baxter explained. “During times of inflation, that's typically great for property prices.”7:4023:11

However, the flip side is that higher interest rates make debt servicing more expensive. Baxter warned that borrowers should not take on the maximum loan amount. “If rates move another one or two or two and a half percent, you've got the ability to not have the rivets pop off,” he said.

With housing costs as a share of income at all-time highs, the trade-off between mortgage payments and other living expenses is becoming increasingly painful for many households. Yet for those who can manage the cash flow, inflation works in their favor: a $1 million mortgage today will be worth far less in 20 years, while the property's value is likely to have risen significantly.24:39

Australia's property market faces deep structural issues that make entry increasingly difficult. The median house price in Sydney is now around $985,000, and CoreLogic projects it could reach $2.9 million by 2043. In 1970, the average house cost about four times annual income; today it's 14 times. “I don't know too many people that are purchasing houses for 14 times their salary,” Reno remarked.

Saving a 20% deposit on such multiples is nearly impossible without help from the “bank of mum and dad,” and even a 5% deposit for a primary residence requires mortgage insurance, adding to costs.15:29

Supply constraints compound the problem. Baxter noted that on the Gold Coast, 40, 000 apartments have been approved but never built. Population growth continues to outpace new housing, and state-level policies (such as Victoria's new taxes on landlords and even a congestion tax on off-street parking in inner-city areas) are discouraging investment. “There are those structural problems within the market, ” he said.

Despite these headwinds, the hosts emphasized that getting into the market as early as possible is crucial, even if it means buying in a less desirable location. “The rising tide lifts all ships, ” Baxter said, recalling advice from a mentor: “As soon as you can afford it, buy one.”22:52

The hosts' core thesis is that the most effective approach is to use shares as a wealth-creation engine and property as a wealth-storage vault. “The stock market, when you do it correctly, can be a terrific way of creating wealth, and the property market can be a terrific place to store it,” Baxter said.

He described a virtuous cycle: generate cash flow from share trading or dividends, then funnel that money into a property deposit or mortgage reduction. This strategy smooths out the volatility of shares while harnessing the stability and leverage of property.27:41

The foundation of any wealth plan, they argued, is owning your own home. It is one of the few tax-free assets (primary residences are exempt from capital gains tax) and it provides a base from which to borrow for further investments. “You have to have that foot in the game, ” Reno said.

Once that base is secured, investors can use the equity in their home to access cheaper debt for an investment property or to increase their share portfolio. The key is to start early, stay disciplined, and avoid the emotional trap of trying to time either market. As Baxter put it, “Time in the market, rather than trying to time the market.”26:509:31