🤔 The Common Belief
"Property has historically outperformed shares in Australia, making it the superior investment for long-term wealth building."
✔ The Evidence-Based Reality
Unleveraged property and unleveraged shares produce remarkably similar returns (within 1-2% p.a.). The perceived outperformance comes from one primary factor: leverage. Property investors routinely borrow 80% of the purchase price, while share investors typically use zero leverage.
The $10,000 Test (1995-2025)
If you invested $10,000 thirty years ago, here's where you'd be today:
Unleveraged Property
$10,000 of equity buys $10,000 of property
$70k
7x return
Capital growth only
~6.7% p.a.
Unleveraged Shares
$10,000 buys $10,000 of shares
$143k
14.3x return
With reinvested dividends
~9.3% p.a.
Leveraged Property (80% LVR)
$10,000 of equity controls $50,000 of property
$350k
35x return
Standard Australian property investment
~12-12.5% p.a.
The Key Insight:
Leveraged property delivers 2.4x the return of unleveraged shares—NOT because property is a superior asset, but because standard property investment employs 4:1 leverage that is institutionally unavailable for share investment.
How 80% LVR Leverage Amplifies Returns
1
Your Equity
$10,000
20% deposit
→
2
Bank Loan
$40,000
80% LVR (standard)
→
3
Asset Purchased
$50,000
Total property value
→
4
30 Years Later
$350,000
Asset grows 7x
Result: Your $10,000 becomes $350,000 (less $40,000 debt) = $310,000 equity
Why Can't Share Investors Do the Same?
80%
Standard property LVR
Easily available
0-75%
Share margin loan LVR range
With significant margin call risk
0
Property margin calls during GFC
Virtually none
10/day
Share margin calls per 1,000 clients (GFC peak)
Frequent & forced
The Fundamental Difference:
| Feature |
Property |
Shares |
| Standard LVR |
80% |
0-75%
(margin loans) |
| Margin Call Risk |
Rare |
Significant
forced sales in downturns |
| Interest Rate |
5.5-7% |
7.5-9.5%+ |
| Social Acceptance |
"Good debt" |
"Risky speculation" |
The Authoritative Evidence: Similar Unleveraged Returns
Federal Reserve Bank of San Francisco (145-year study, 1870-2015)
Australian housing: 6.37% p.a. real returns | Australian equities: 7.81% p.a. real returns | Difference: 1.44% p.a.
Russell Investments/ASX Long-term Report (20 years to 2017)
Residential property: 10.2% p.a. | Australian shares: 8.8% p.a. | Difference: 1.4% p.a.
Recent Performance (10 years to December 2024)
Property: 132.6% total return | Equities: 126.4% total return | Difference: 6.2 percentage points over decade
Across multiple studies, timeframes, and methodologies: unleveraged returns converge within 1-2% annually.
⚠️ Critical Risk: Leverage Amplifies Losses Too
The same leverage that amplifies gains can devastate equity when prices fall. Many investment property buyers borrow 90%+ of purchase price—and that's before stamp duty and acquisition costs push effective LVR even higher.
📊 The Maths at 90% LVR
| Purchase price |
$800,000 |
| Loan (90% LVR) |
$720,000 |
| Your equity |
$80,000 |
| + Stamp duty & costs (~5%) |
$40,000 |
| Total cash invested |
$120,000 |
If property falls 15% (to $680,000):
- Property value: $680,000
- Loan still owing: $720,000
- You're $40,000 underwater — a 133% loss of your $120,000 investment
📍 Historical Examples: 15%+ Declines Do Happen
- Perth 2014-2020: Median house prices fell ~14% from peak ($579k to $495k). Outer suburbs like Ellenbrook fell 26%. Mining towns saw 40-80% drops.
- Sydney 2017-2019: House prices fell 11.1% as credit tightened following APRA interventions.
- Melbourne 2017-2019: Declined 7.2% in the same regulatory-driven correction.
- National 2022-2023: Macquarie forecast 15% peak-to-trough falls; Sydney and Melbourne exceeded this in some segments.
- Queensland mining towns 2012-2015: Dysart fell 73%, Moranbah fell 71% — investors with mortgages faced catastrophic losses.
🛡️ The Critical Success Factor: Holding Capacity
Property is illiquid—you can't sell quickly or partially. Having sufficient financial capacity and cash reserves to service a large debt through potentially negative return periods (which can last years) is essential for any leveraged strategy. If you're forced to sell in a downturn, you crystallise losses that might otherwise recover. The ability to hold matters as much as the asset itself.
The Bottom Line for Investors
Property and shares produce similar returns when neither is leveraged.
Property appears to outperform because:
1 Australians routinely borrow 80% to buy property (4:1 leverage)
2 This leverage is stable, long-term, and margin-call resistant
3 Equivalent leverage for shares (0-75% LVR via margin loans) comes with significant margin call risk
Understanding this distinction is critical for making informed investment decisions and managing the risks that come with any leveraged strategy.
Important Information & Disclaimers
General Advice Warning
This document contains general information only and has been prepared without taking into account your objectives, financial situation or needs. Before acting on any information contained in this document, you should consider the appropriateness of the information having regard to your objectives, financial situation or needs. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.
Not Personal Advice
The information provided in this infographic is not intended to be personal financial product advice and does not take into account your personal circumstances, needs or objectives. You should consider seeking independent financial advice before making any decisions based on this information.
Past Performance
Past performance is not a reliable indicator of future performance. The historical returns and data presented cover the period 1995-2025, which has been characterised by generally rising asset prices. Future returns may differ materially from those experienced historically. Investment values can fall as well as rise, and you may not get back the amount you invested.
Leverage and Gearing Risks
This document discusses leveraged investment strategies (borrowing to invest). Leveraged investments carry significantly higher risks than unleveraged investments, including:
- Amplified losses when asset values decline
- Potential for total loss of invested capital
- Margin calls requiring immediate cash payments or forced asset sales
- Interest rate risk affecting debt servicing capacity
- Reduced flexibility during adverse market conditions
Gearing is not suitable for all investors. You should only consider leveraged investment strategies if you fully understand the risks, have appropriate financial capacity to service debt through market cycles, and have received comprehensive personal financial advice.
Property Investment Specific Risks
Property investment involves specific risks including but not limited to:
- Illiquidity and inability to quickly convert to cash
- High transaction costs (stamp duty, agent fees, legal costs) typically 7% of property value
- Ongoing costs (rates, insurance, maintenance, management) typically 20-30% of gross rental income
- Vacancy periods resulting in loss of income while debt servicing continues
- Concentration risk from single-property exposure
- Market risk from changes in local supply/demand, interest rates, economic conditions
- Regulatory and taxation changes affecting investment returns
Equity Investment Specific Risks
Share market investment involves risks including but not limited to:
- Market volatility and price fluctuations
- Company-specific risks affecting individual holdings
- Economic and political factors affecting market performance
- Currency risk for international investments
- Liquidity risk for certain securities
Data Sources and Limitations
The data presented is sourced from publicly available research including Federal Reserve Bank of San Francisco, Reserve Bank of Australia, Russell Investments/ASX, CoreLogic, PropTrack, and other reputable sources. While these sources are considered reliable, data accuracy cannot be guaranteed. Return calculations are based on median values and index performance, which may not reflect individual investor outcomes. Transaction costs, taxation, and individual circumstances can significantly affect actual returns.
Taxation
This document contains general information about taxation matters and does not constitute taxation advice. Taxation outcomes depend on individual circumstances. You should seek professional tax advice from a qualified tax adviser before making any investment decisions. Tax laws and interpretations change regularly and may be subject to different interpretations.
No Guarantee of Returns
No guarantee is provided regarding future investment returns. The examples and scenarios presented are for illustrative purposes only and do not represent forecasts or predictions. Actual outcomes will vary based on market conditions, individual circumstances, timing of investment, and numerous other factors.
Regulatory Information
WSP Pty Ltd (ABN 50 197 426 140) trading as Wealth & Security Planners and Streamline Financial Planning is a Corporate Authorised Representative (Number 276624) of Australian Financial Directions Pty Ltd (ABN 14 135 004 947, AFSL 344971).
Financial planning services are provided in accordance with the requirements of the Corporations Act 2001 (Cth) and ASIC regulatory guidance. We maintain Professional Indemnity Insurance as required by law.
Authorised Representatives: Michael O'Hara (241386), John Claessen (241385), Simon Tomkinson (241387), Kerry Franklin (241383)
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Before making any investment decisions based on the information in this document, you should arrange a consultation with a qualified financial planner who can assess your personal circumstances, objectives, and financial situation. The team at Wealth & Security Planners is available to provide comprehensive personal financial advice tailored to your needs.
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© 2025 WSP Pty Ltd (ABN 50 197 426 140) trading as Wealth & Security Planners. All rights reserved. This document is for the exclusive use of clients and prospective clients of Wealth & Security Planners. It may not be reproduced, distributed, or published without written permission. The information is current as at November 2025 and may be subject to change without notice.
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