28 Mar Comparing Residential Property vs Shares: A Long-Term Investment Perspective

Comparing Residential Property vs Shares: A Long-Term Investment Perspective

With interest rates starting to come down in Australia, property investing has once again come into favour. After a period of tightening monetary policy, higher mortgage rates and softening prices, investors are now re-entering the market with renewed confidence. But as property prices rise, the question resurfaces: is residential property a good investment compared to other assets, particularly shares?

This article explores how residential property stacks up against the share market over the past 10–20 years, comparing growth rates, volatility, income, and overall return potential. We’ll look at median price data across Australia’s major capital cities, examine how long it typically takes for home prices to double, and break down the pros and cons of each investment type.

Historical Growth: Property vs Share Market

Residential property in Australia has a reputation for steady long-term growth – there’s even a common adage that property prices “double every 7 to 10 years.” However, the reality is more nuanced. Recent data show that while some properties have doubled value in under 7 years, others have taken decades​. In fact, how quickly prices double can vary widely by city and property type.

Property price growth: Over the past 10–20 years, Australian house prices have generally risen significantly (though not uniformly). Nationally, median house prices roughly doubled over 20 years from 2002 to 2022 (about +104%), whereas unit/apartment prices grew about +51% in that period​. In the last decade alone, house values in most capitals increased between ~50% and ~90%, with some cities nearly doubling:

• Sydney’s median house price doubled in about 10 years​, rising ~67% in the last decade​.
• Melbourne’s house prices grew ~47% over the past decade​.
• Brisbane, Adelaide, and Hobart saw the strongest house growth – around 80–90% over 10 years​, almost doubling.
• Perth’s growth was more modest (~55% in 10 years​), reflecting a long downturn after the mining boom.
• Canberra’s house prices rose ~60% in the decade​, while Darwin’s were roughly flat or slightly down over 10 years​ (Darwin had a mining-related boom mid-2000s, then a decline).

Share market growth: The Australian share market (ASX 200) and US share market (S&P 500) have also delivered strong long-term returns. The ASX 200’s total returns (including dividends) have averaged around 9–10% per annum in recent decades​. Over the last 10 years, Australian shares returned roughly 7–9% per year on average, which cumulatively is on par with or slightly below many property markets. U.S. shares (S&P 500) have performed even better – historically about 10% per annum on average since the 1950s​, and around 11–13% annually in the most recent 10-year period during a major bull market. For example, despite a sharp pandemic crash in 2020, the S&P 500 nearly tripled from 2013 to 2023 (a total return of ~265%) which is equivalent to roughly 13% per year compounded.

To illustrate the comparison, consider the period since the pandemic (early 2020 to early 2025). Australian property prices surged after an initial dip: Adelaide led the capitals with +81.7% growth, followed closely by Perth (+81.2%) and Brisbane (+80.9%) in that 5-year span​. Sydney rose a solid 38.6% and Hobart ~37%, whereas Melbourne lagged at +15%​ (Melbourne had extended lockdowns and other drags). By comparison, the ASX 200 climbed about 71.4% from its March 2020 trough even after a recent pullback​. In other words, an investor who timed the share market low in 2020 could have seen ~70% gains in five years (not counting dividends). U.S. shares did even better in that period, as Wall Street saw a powerful rally to record highs.

Bottom line on growth: Residential property has proven to be a good long-term investment in most Australian capital cities, with houses tending to appreciate strongly over time. Over 10+ year periods, house price growth in many cities has been on par with the share market’s capital gains, and in some cases higher. However, Australian units/apartments have generally underperformed both houses and shares over the long term (often taking far longer to double in value)​. Meanwhile, diversified share portfolios (especially including global shares) have historically delivered high returns as well. Long-term investors in the S&P 500, for example, have enjoyed roughly ~10% per year on average​, albeit with more year-to-year volatility.

How Fast Do Property Prices Double? (Capital City Table)

One way to assess property’s growth as an investment is to see how many years it takes for prices to double. The table below, based on PropTrack data, shows the median sale prices (as of early 2025) for houses and units in Australia’s major capitals, how many years it took for those prices to double, and the equivalent annualised growth rate. This highlights the differences in long-term growth between cities and between houses vs units:

How Fast Home Prices Have Doubled in the Capital Cities (median prices and time to double):

Table: Median prices are for March 2025 (houses and units) in each capital. “Years to double” is the approximate time for median values to double from earlier levels, and the annualised growth is the compound growth rate corresponding to that doubling period. Houses have generally doubled faster than units in every city, reflecting stronger long-term capital growth for land-rich properties​. Sydney has been the standout, with house prices doubling in around a decade – the fastest among major cities​. In contrast, Perth and Darwin have seen much slower growth; Perth was the slowest capital for both houses and units to double in value​ (taking two decades or more), and Darwin’s prices have not doubled from past peaks at all in recent times (Darwin’s market actually declined in the last 10 years​).

What this means for investors: Residential property can be a great long-term investment, but outcomes vary by location and property type:

• Investing in houses in high-demand cities (like Sydney) has historically yielded strong long-run gains (e.g. ~7% annual growth over a decade, which outpaced inflation and built substantial equity). Even many smaller cities like Hobart and Adelaide have delivered excellent long-term appreciation for houses.
• Units/apartments, however, tend to appreciate more slowly. They often take far longer to double in value (if at all), partly due to having less land component and often more abundant supply​. For example, a Sydney unit growing ~4–5% a year might take ~15+ years to double – much longer than a house in the same city.
• Some markets (like Perth and Darwin) have had long flat periods. External economic factors (e.g. mining booms and busts) meant property there did not follow the “every 7–10 years” doubling rule at all. This underlines that property is not a guaranteed fast-growth investment in every case – timing and location matter.

In summary, over the long haul property has generally trended up strongly, especially in Australia’s largest cities. But the growth rate can vary; investors should be wary of assuming all properties will automatically double in value within a decade​. As with any investment, past performance can be a guide but not a promise.

Returns, Income, and Volatility: Shares vs Property

Beyond pure capital growth, investors should consider total returns (including income) and the volatility/risk profile of shares vs property.

Income potential: Both asset classes can provide ongoing income, but in different forms:

• Shares pay dividends to investors (a share of company profits). The dividend yield on Australian shares (ASX 200) is currently around 3.5%, slightly below the long-term average ~4%​. For U.S. shares, dividend yields tend to be lower (~1.5–2% for the S&P 500 in recent years), as many U.S. companies reinvest profits or buy back shares instead of paying out large dividends.
• Property can generate rental income if you invest in a rental property. Gross rental yields nationwide are roughly ~4.4% on average​. Units often yield a bit more (~4.9% gross) and houses a bit less (~4.0% gross)​. However, unlike dividends, rental yield comes with expenses – e.g. interest on loans, maintenance, council rates, insurance, property management fees, etc. These costs can significantly eat into the net yield (sometimes turning it negative, especially if interest rates are high or the property is highly leveraged). By contrast, share dividends are essentially net to the investor (companies have paid their expenses and taxes before distributing profits).

Growth vs income mix: Historically, shares have delivered a combination of moderate dividends + strong capital growth, whereas property (especially houses) delivers lower net income yield but solid capital growth. For example, a diversified Australian share portfolio might yield ~4% and grow ~5% per year in value, totaling ~9% annual return. A property might yield only ~2–3% net after costs but could grow ~5–7% a year in value in a good location. In both cases, total returns can end up in the high single digits over the long run, though the paths taken can be very different.

Volatility and risk: One of the biggest differences is how volatile these investments are:

• The share market is highly liquid and prices fluctuate daily. It is not unusual for share indices to rise or fall by 1–2% in a single day, or 10% in a month during turbulent times. Indeed, in March 2020 when the COVID-19 pandemic hit, the ASX 200 plunged about 30% in a matter of weeks​. Such sharp swings are an inherent risk with shares. Short-term volatility is high – but in the long run, markets have tended to recover and move higher.
• Property values move more slowly. Real estate is valued infrequently (by periodic sales or appraisals) and historically has had multi-year upcycles and downcycles rather than day-to-day swings. This gives an impression of stability – homeowners don’t see the value of their house change on a ticker every second. In downturns, property prices typically slide gradually. For instance, Australian dwelling values dipped modestly in 2018–2019 and again in 2022 when interest rates rose, but those declines were on the order of ~5–10%, not 30% overnight crashes. However, property is not risk-free or immune to drops: if economic conditions worsen or interest rates spike, housing prices can decline significantly over a year or two (as seen in some past corrections). The key difference is the speed and frequency of price changes. Property is less volatile in the short term, partly due to illiquidity, but over a long horizon it still carries market risk.

Many investors find property’s slower-moving nature emotionally easier to handle – you’re less likely to panic sell a house due to a bad headline, whereas share investors may react rashly to market volatility. That said, lack of frequent pricing doesn’t mean property can’t lose value; it just happens in slow motion.

Leverage (borrowed money): One reason property can generate large gains for investors is the use of debt. Banks are generally willing to lend a large percentage (often 70–80% or more) of a property’s value at relatively low interest rates. Investors commonly make a 20% deposit and borrow 80%. This leverage amplifies returns on equity. For example, if you put down $100k on a $500k investment house and it doubles to $1,000k over time, you gain $500k on $100k equity – a 500% return (ignoring costs) – far higher than the property’s headline 100% growth. Leverage magnifies profits and losses, but in property, loans are secured long-term with the property as collateral. There are no margin calls on a home loan in normal circumstances – even if your house value dips below the loan amount, the bank doesn’t demand instant repayment (negative equity is only an issue if you must sell)​. This allows property investors to ride out downturns more easily as long as they can hold and service the loan.

In contrast, borrowing to invest in shares (margin lending) is less common and more risky. Share portfolios can be volatile, and if the market falls, a leveraged share investor might face a margin call – they could be forced to repay part of the loan or sell shares at a loss to maintain the required loan-to-value ratio​. This makes high leverage in shares dangerous for most retail investors. As a result, most people invest in shares with either no leverage or modest leverage (e.g. through products or geared funds), meaning the power of compounding is slower unless one continuously adds new savings. By contrast, many Australians effectively use leverage in property by taking out large mortgages, which has historically turbocharged their property wealth during boom periods.

Liquidity and diversification: The share market offers far superior liquidity and diversification:

• Liquidity: You can buy or sell shares with a few clicks and settle within days. If you need cash or want to rebalance your investments, shares are easy to trade. Property, on the other hand, is illiquid – selling a house can take weeks or months of listing, inspections, negotiations, and significant transaction costs (agent commissions, stamp duty when buying, etc.). You generally can’t sell just a part of an investment property; it’s an all-or-nothing sale. This makes property a long-term commitment by nature​.
• Diversification: With shares, even a relatively small investment (say $10k) can be spread across dozens of companies or an index fund, reducing risk via diversification. A larger amount (say $500k) could be split across Australian shares, international shares, different sectors, etc., achieving a broad portfolio. Property investors usually have to put a large sum into a single asset – e.g. one $1M rental house in one suburb. This concentrates risk. If that suburb’s market slumps or the specific property has issues (like a bad tenant or structural problems), the investor is heavily exposed. Owning multiple properties can diversify this, but requires even more capital and debt. In summary, shares allow easier spreading of risk, whereas property is a big bet on one asset at a time.

Costs and taxes: Each asset has its own cost structure and tax treatment:

• Property has high entry and exit costs (stamp duty, legal fees, inspections, agent fees) that can amount to tens of thousands of dollars. Ongoing costs include maintenance, insurance, council rates, potentially strata levies for units, and interest if borrowed. Some costs are tax-deductible for investment properties (e.g. interest, repairs), and depreciation can be written off to reduce taxable income. Rental income is taxable, but many investors use negative gearing (where rental income < interest+expenses) to offset other income tax. When selling an investment property, capital gains tax (CGT) applies to the profit (with a 50% discount if held >1 year). Notably, if the property is your principal home, it is exempt from CGT on sale, which is a major tax advantage of owning your home versus other investments​. This means an owner-occupier’s house can appreciate and be sold tax-free – effectively a huge benefit, though you can only have one main residence.
• Shares have very low transaction costs (brokerage is typically <0.5%). There are no ongoing maintenance costs, aside from optional management fees if you invest via managed funds or ETFs. Dividends from Australian companies come with franking credits (a tax credit for corporate tax already paid), making them tax-effective for local investors. Capital gains on shares are taxed similarly (50% discount after 1 year). Unlike property, there’s no personal-use exemption – except that gains within retirement accounts (superannuation) may be tax-free after retirement age. Overall, shares are more liquid and often more tax-efficient, but lack the CGT exemption that a primary residence enjoys.

Emotional and practical factors: Many Australians have a cultural comfort with property – you can see and use a house. Property serves a practical purpose (housing your family or tenants) and a psychological one. As owner-occupiers, people derive utility and pride from their home, beyond financial returns​. This “emotional dividend” doesn’t exist with shares – a share is an abstract ownership slice of a company. For some, this makes property feel more tangible and stable. On the other hand, owning rental property can also mean active involvement and hassle – dealing with tenants, repairs, vacancies, etc. Shares are hands-off; you don’t need to fix a leaky roof of a share holding. This is why some busy professionals prefer the relative ease of investing in funds or shares, whereas others don’t mind putting in effort for a property.

Pros and Cons at a Glance

Both residential property and shares can be rewarding long-term investments. Here’s a summary of the advantages and disadvantages of each:

Residential Property – Pros:

• Historically strong capital growth, especially for houses in major cities (often outpacing inflation)​.
• Ability to use leverage (mortgages) to amplify gains; lenders readily finance property at low rates, with no margin calls​.
• Tangible asset that provides utility (shelter) and can be improved (renovations may add value).
• Tax-free capital gains on your principal residence (family home)​. Even for investment properties, tax benefits like negative gearing and depreciation can offset income.
• Less day-to-day price volatility – values tend to be more stable in the short term, which can encourage a long-term mindset.

Residential Property – Cons:

• Very high entry costs (e.g. stamp duty) and exit costs (agent commissions) – you need a substantial upfront commitment.
• Illiquid: you can’t quickly sell or partially sell a property if you need cash​. Selling takes time and effort.
• Ongoing expenses (maintenance, rates, insurance) and potential headaches (bad tenants, vacancies). The net rental yield after costs is often quite low.
• Lack of diversification: a lot of money tied into one asset in one location​.
• Exposure to interest rate risk if you have large loans – rising interest rates can squeeze your cash flow or reduce buyer demand (hurting property values).
• Property markets can stagnate for long periods or even fall, depending on local economic factors (as seen in Perth/Darwin). There’s no guarantee of quick capital growth in every market​.

Shares – Pros:

• High liquidity and low transaction costs – easy to buy/sell in small or large amounts, allowing flexibility and rebalancing.
• Diversification – you can spread investments across many companies, industries, and countries, reducing risk.
• Generally strong long-term returns: historically ~10% p.a. for global equities​, and ~9% for Australian market with dividends​. Over decades, shares have compounded wealth effectively.
• Provide passive income through dividends (e.g. ~3–4% yield on ASX​), often with franking credits in Australia (reducing tax).
• No active management required – no tenants or maintenance. Truly hands-off if you use index funds or professional management.
• Highly accessible – you can start with small amounts and add over time, which is great for regular saving/investing plans.

Shares – Cons:

• Volatility: market values can swing wildly in the short term. It requires discipline to not panic in downturns when your portfolio might drop 20% or more in a year.
• Harder for average investors to use safe leverage – margin loans are risky, so most share investors can’t magnify returns the way property investors with mortgages can.
• Behavioral risk: the ease of trading can be a curse – some people buy high and sell low due to emotions. Staying invested for the long run is crucial to reap the average ~10% returns, but not everyone manages this.
• No personal use or emotional utility – you can’t live in your shares. Some folks simply find shares abstract or intimidating compared to bricks and mortar.
• Tax: While shares are tax-efficient, you do pay capital gains tax on profitable sales (with no main residence exemption equivalent). Also, dividends are taxable in the year received (though franking helps).

Conclusion: Which is Better for the Long Term?

There is no one-size-fits-all answer—both residential property and shares have proven to be effective long-term investments, each with their own considerations. Residential property can build substantial wealth over time, particularly when investing in well-located houses and holding for the long term. The past 10–20 years show that when chosen wisely, property can deliver impressive capital growth—often doubling in value within 10 to 15 years in the stronger markets—while also offering the relative stability of a tangible asset. It remains a familiar and accessible investment for many Australians and benefits from the ability to use leverage without the risk of margin calls.

By comparison, the share market offers equally strong—if not stronger—growth potential over time, especially when dividends are reinvested. With lower capital requirements, greater liquidity, and easy diversification, shares can provide more flexibility and accessibility. However, they do require a tolerance for volatility and a steady mindset to stay invested through market cycles.

For long-term wealth creation, a diversified approach often makes sense. Many Australians already hold shares through their superannuation, so adding residential property can broaden their asset base. Likewise, those heavily exposed to property may benefit from adding liquid, diversified equity investments to balance their portfolio.

In summary, residential property continues to demonstrate strong long-term investment potential—particularly for capital growth in Australia’s major cities—but carries higher entry costs, limited liquidity, and concentrated risk. Shares can match or exceed property returns, while offering greater flexibility and lower maintenance. Ultimately, the most effective investment strategy depends on individual goals, financial capacity, and risk appetite. For many, combining the strengths of both asset classes—property for stability and leverage, shares for growth and diversification—can provide a resilient foundation for long-term financial success.

Important information and disclaimer

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