Property vs Shares - which is better over 30 years.

This is a common question often asked and the answer isn't clear or easy.

I think the answer lies with the person asking the question.

If you are a self motivated & disciplined saver I think Equities are the answer.

If you need to be forced to save, getting a mortgage is probably the best way to go.

The bank will force you to make the 3K-4K deposits per month which is standard these days.

These are the current figures (2025):

A $500,000 mortgage typically results in monthly repayments between $2,850 and $3,400+ at current Australian interest rates (approx. 5.5%–7%) over 30 years. Lower rates near 4% bring payments down to roughly $2,387, while higher rates significantly increase them.

Typical $500k Monthly Repayments (30 Years, Principal & Interest):

5.5% Interest Rate: Approx. $2,839 per month.

6.0% Interest Rate: Approx. $2,998 per month.

6.5% Interest Rate: Approx. $3,160 per month.

7.0% Interest Rate: Approx. $3,327 per month

I asked Chat GPT this question:

"compare a 500k deposit + 500K mortgage on a australian home (monthly repayments between $2,850 and $3,400+ at current Australian interest rates (approx. 5.5%–7%) over 30 years) vs the same in australian shares (500K initial investment + 3000 per month top up over 30 years)"

This was it's response:

Now we’re comparing apples-to-apples with capital on both sides, which is much more interesting:

• Property: $500k deposit + $500k mortgage
• Shares: $500k upfront + $3,000/month
• Time horizon: 30 years

I’ll walk through this cleanly and then give you the real-world conclusion.

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📊 Key assumptions (based on real Australian data)

• Australian shares: ~9–10% p.a. long-term
• Property:
  • ~5–6% capital growth
  • ~7–9% total return incl. rent (before costs)

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🏠 Scenario A — Property

Inputs

• $1M property
• $500k loan
• ~$3,000/month repayments
• 30 years

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💰 Total cash invested

• Deposit: $500k
• Mortgage payments: ~$1.1M
  👉 Total out-of-pocket ≈ $1.6M

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📈 Property value after 30 years

• 5% growth → $4.3M
• 6% growth → $5.7M
• 7% growth → $7.6M

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🧾 Net wealth

Mortgage is fully paid off:

👉 Final wealth ≈ $4.3M – $7.6M

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⚠️ Reality check (VERY important)

Property returns are not clean:

• Stamp duty (~$40–50k)
• Maintenance (~1–2%/yr)
• Insurance, rates
• Selling costs

👉 These can reduce returns by 1–2% per year, which is massive over 30 years

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📈 Scenario B — Shares

Inputs

• $500k upfront
• $3,000/month for 30 years
• Total invested = $1.58M (almost identical to property)

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💰 Future value

At different return levels:

• 7% → $5.9M
• 8% → $7.5M
• 9% → $9.6M
• 10% → $12.4M
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Scenario	Property	Shares
Total invested	~$1.6M	~$1.58M
Leverage	Yes	No
Expected return	~6–8% net	~8–10%
Final wealth	$4.3M–$7.6M	$5.9M–$12.4M
Risk	Concentrated	Diversified
Liquidity	Low	High

......

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Now lets add dividends vs rent.

Include rental income vs dividends

This is the missing piece that makes the comparison actually realistic.

Now we’ll include:

• 🏠 Rental income (property)
• 📈 Dividends (shares)

And compare total return properly.

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🏠 Scenario A — Property (with rent)

Assumptions (typical Australia)

• Property value: $1M
• Rental yield: 3–4%
• Growth: 5–6% p.a.
• Costs: ~1.5–2% p.a. (maintenance, rates, insurance, vacancy)

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💰 Rental income

• Gross rent: $30k–$40k/year
• Costs: ~$15k–$20k/year

👉 Net rent: ~$10k–$20k/year initially

Important:

• Rent grows over time (inflation + demand)
• By year 30 → could be ~$40k–$80k/year net

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📈 Total return breakdown

Property total return ≈

• Capital growth: 5–6%
• Net rental yield: ~1–2% after costs

👉 Total ≈ 6–8% p.a.

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💰 Final outcome (30 years)

• Property value: $4.3M – $5.7M (5–6%)
• Plus rental income accumulated (if reinvested): adds ~$0.5M–$1.5M

👉 Total effective wealth: ~$5M – $7M

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📈 Scenario B — Shares (with dividends)

Assumptions (Australian market)

Using something like the S&P/ASX 200 Index:

• Dividend yield: ~4%
• Growth: ~5–6%
• Total return: ~9–10% p.a.

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💰 Dividends

Year 1:

• $500k × 4% = $20k/year

Over time:

• Dividends grow with market (~5–6%)

By year 30:

• Annual dividends ≈ $150k–$300k/year

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🔁 Reinvestment effect (this is huge)

If dividends are reinvested:

👉 They drive ~50%+ of total returns

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💰 Final outcome (30 years)

With:

• $500k upfront
• $3k/month
• 9–10% return

👉 Portfolio value:

• $9M – $12M

Breakdown:

• Capital: ~$6M–$8M
• Dividends compounding: ~$3M–$4M

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Negative Gearing vs Franking Credits.

This is an after-tax comparison (franking credits vs negative gearing).

This is where the comparison gets real, because Australia’s tax system materially changes outcomes.

I’ll compare:

• 🏠 Property with negative gearing → later positive gearing
• 📈 Shares with dividends + franking credits

Using realistic Australian assumptions.

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🇦🇺 Key tax concepts (quickly)

Shares → Franking credits

Using something like the S&P/ASX 200 Index:

• Dividends are often fully franked
• Company already paid 30% tax
• You get a tax credit for that
• Result: higher effective income, especially if your tax rate <30%

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Property → Negative gearing

• Early years: losses (interest > rent)
• Loss reduces your taxable income → tax refund
• Later: becomes positively geared → taxable income

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🏠 PROPERTY — After-tax reality

Early years (negative gearing phase)

Typical:

• Rent: ~$30k
• Costs + interest: ~$40k–$45k
  👉 Loss: ~$10k–$15k

If you're on a 37% tax rate:

👉 Tax refund: $3.7k–$5.5k/year

✔️ Helps cash flow
❌ But you're still losing money overall

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Later years (positive gearing)

Once rent rises and loan shrinks:

• Rent: ~$60k–$80k
• Costs: ~$20k
  👉 Profit: ~$40k–$60k

Tax:

• At 37% → $15k–$22k tax/year

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Capital gains tax (CGT)

If investment property:

• 50% CGT discount after 12 months

Example:

• Gain: $4M
• Taxable: $2M
• Tax ≈ $740k (at 37%)

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🧾 Property after-tax summary

• Tax benefits early: moderate
• Tax drag later: significant
• Big CGT bill at the end

👉 Net effect:

Tax reduces returns by ~1–2% per year over long term

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📈 SHARES — After-tax reality

Dividends + franking

Example:

• Dividend yield: 4%
• Fully franked

On $500k:

• Cash dividend: $20k
• Franking credit: ~$8.6k
• Grossed-up income: ~$28.6k

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Tax impact

If tax rate = 37%:

• Tax on $28.6k = ~$10.6k
• Minus franking credit ($8.6k)

👉 Tax payable: ~$2k only

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If tax rate <30%:

👉 You actually get a refund

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Capital gains (shares)

• Same 50% CGT discount
• BUT:
  • You control when to sell
  • Can spread gains across years

👉 Much more tax flexibility than property

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🧾 Shares after-tax summary

• Dividends: tax-efficient
• Franking credits: huge advantage
• CGT: controllable

👉 Net effect:

Tax drag closer to 0.5–1% per year

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⚖️ AFTER-TAX COMPARISON

Factor	Property	Shares
Early tax benefit	✅ Negative gearing	❌ None needed
Ongoing tax	❌ High (rent taxed)	✅ Reduced via franking
CGT flexibility	❌ Low (sell all at once)	✅ High (sell gradually)
Tax efficiency	❌ Moderate	✅ High
Net return after tax	~5–6%	~7–9%

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🧠 The big insight

👉 Negative gearing is often overrated

It:

• Reduces losses
• But doesn’t create profit

You’re still:

Spending $1 to get ~$0.37 back

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👉 Franking credits are underrated

They:

• Boost income significantly
• Reduce or eliminate tax
• Compound over time

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🔥 What this does to your original comparison

Before tax:

• Property: ~6–8%
• Shares: ~9–10%

After tax:

• Property: ~5–6%
• Shares: ~7–9%

👉 The gap actually widens in favour of shares

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🏁 Final conclusion

After tax (including negative gearing and franking credits), shares are significantly more tax-efficient and typically deliver higher net returns than a leveraged investment property.

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⚠️ One exception (very important)

If the property is your PPOR (home you live in):

• ❌ No negative gearing
• ✅ No capital gains tax EVER

👉 That is a massive advantage

In that case:

Property can outperform shares purely due to CGT exemption

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Final Take Home Thoughts:

If you go the shares path ... this assumes that you will be making $3000 deposits into shares even when you don't need to.

You will possibly want to enjoy your life a bit more that those mortgages so your final figure will probably be less.... but then life is meant to be enjoyed , esp when you are young.

The lack of leverage is a blessing and a curse. It reduces the upside & also the downside.

I don't like debt so I think of it more as a plus.

If you are the sort of person who likes to go shopping every time you get a pay rise then get a mortgage.

The bank will be your savings enforcer.