For generations, property ownership has been central to the Australian Dream - a symbol of financial security and success. Many have long aspired to save, purchase a home, and build wealth through real estate, a strategy that has proven effective as property values have risen over time. However, the realities of property ownership - including rising land taxes, liquidity constraints, and the complexities of managing tenants - are growing increasingly burdensome.
At the same time, the evolving wealth management landscape is prompting investors to reassess asset allocation strategies. For some, equities can offer compelling advantages, while also providing greater flexibility and liquidity than direct property holdings.
This article explores the strategic case for transitioning wealth from property into equities, considering key factors such as dividend income, capital growth, and tax efficiencies to help investors determine whether such a shift in strategy aligns with their financial goals.
Property vs Shares: Insights from an Investment Advisor
Comparing Income from Property and Shares
Many investors are drawn to property for its tangibility, familiarity, and the dual benefits of rental income and capital growth. However, shares can offer comparable wealth-building potential - often with greater flexibility, diversification, and tax efficiency.
CoreLogic’s 2024 30-Year Property Review shows that Australian residential dwelling values have increased by 378% over the past three decades, equating to a compound annual growth rate (CAGR) of 5.3%. However, income generation from property remains relatively modest. After accounting for expenses such as land tax, maintenance, insurance, and management fees, net rental yields typically fall between 2% and 3%.
In contrast, BlueRock’s diversified model portfolio targets a yield of approximately 5.0% - before factoring in franking credit rebates. Once franking credits are included, the effective yield is even higher, significantly outpacing net rental income from property.
To illustrate the difference: a $1 million investment in residential property might generate between $20,000 and $30,000 in net rental income each year. A $1 million investment in BlueRock’s model portfolio, by comparison, is designed to deliver approximately $50,000 in income, plus an estimated $9,000 in refundable franking credits - bringing total tax-effective income closer to $59,000 annually. This enhanced income, combined with liquidity and ease of management, makes shares an attractive option for retirees and income-focused investors.
As an illustrative example, CBA currently offers a forecast dividend of $4.65 per share, fully franked. At a share price of approximately $147, this equates to a gross yield of around 3.16%. In an SMSF in the pension phase, the additional franking credit of $1.99 per share lifts the effective income closer to 4.5% per annum.
While this illustrates the power of franking credits at the stock level, BlueRock’s model portfolio is diversified across asset classes. Income and tax advantages should be considered within the context of the broader portfolio.
Additionally, shares allow for the reinvestment of dividends, accelerating capital growth through compounding - without the operational burdens often associated with managing physical property.
Property vs Shares: Liquidity & Diversification
Direct shares provide greater liquidity than property, allowing investors to adjust portfolios and respond to changing market conditions more rapidly. Unlike property, which may take months to sell.
To illustrate the difference: if an investor needs access to a portion of their capital, they can sell $50,000 worth of shares within minutes - no paperwork, no agents, no delay. With property, the asset is indivisible. You can’t sell the kitchen or a bedroom to raise cash; the entire property must be sold, often through a lengthy, uncertain, and costly process.
Share portfolios also offer diversification across sectors and geographies, reducing the concentration risk inherent in direct property investments.
Property vs Shares: Market Trends & Economic Impact
Both residential property and equities are subject to cycles and volatility - each influenced by different factors. Property values fluctuate in response to supply, demand, interest rates, and broader economic conditions, while equities tend to move with corporate earnings, innovation, and global sentiment.
CoreLogic’s latest Home Value Index shows national dwelling values rose by 0.3% in February 2025, following two consecutive months of declines across Sydney, Melbourne, and Canberra. Although some markets have rebounded, performance remains uneven, highlighting the cyclical and region-specific nature of property returns and ongoing uncertainty among buyers and sellers.
Over longer time horizons, the Australian share market has delivered compelling returns. The ASX 200 has averaged annual total returns of approximately 9-10% over the past 30 years, including dividends. This is notwithstanding the significant volatility we have seen in recent weeks across global equity markets, including Australia - a reminder that market sentiment can shift quickly across all asset classes.
Importantly, share market corrections tend to play out over shorter time frames compared to property cycles. Equities also offer the advantage of reinvested dividends, ongoing liquidity, and diversification across sectors and geographies, whereas property is more concentrated and difficult to adjust quickly.
On the income side, CoreLogic reports gross rental yields for Australian residential property currently range from 3.0% to 4.4%, with net yields typically falling to 2-3% after costs. While rents have risen recently, it’s unlikely this growth will continue indefinitely. Rising living costs, affordability constraints, and interest rate pressures may limit landlords’ ability to further increase rents.
Compared to property, share portfolios require less maintenance, offer potentially higher returns, and provide greater flexibility to adapt to market changes - all without the burden of managing physical assets.
Benefits of Investing in Direct Shares in SMSF Environment
Many investors consider property investments within a Self-Managed Superannuation Fund (SMSF) as a long-term wealth-building strategy, but direct shares can offer key advantages that property cannot easily match.
1. Franking Credits & Tax Efficiency
Australian equities often provide franking credits, which allow investors to offset tax on dividends. Let’s look at an example scenario:
- An investor holds $1m in a diversified portfolio aligned with BlueRock Investments’ model, targeting a yield of approximately 5.0%, or $50,000 in annual income.
- In the SMSF pension phase, this is complemented by a franking credit rebate of around 0.9%, equating to an additional $9,000 in refundable tax credits. In total, the SMSF could receive approximately $59,000 per year in income, tax-free.
- In contrast, a $1 million investment in residential property typically yields between 2–3% after costs ($20,000–$30,000 in net rental income), often with greater uncertainty due to vacancies, maintenance, and market fluctuations.
- This example demonstrates the income advantage available to SMSF investors prioritising stable, tax-effective cash flow.
2. Tax Refunds in the SMSF Pension Phase
Once an SMSF enters the pension phase, it benefits from a 0% tax rate on investment earnings up to the $1.9 million transfer cap (scheduled to increase to $2 million from 1 July 2025), including dividends and capital gains.
This tax-free environment makes franking credit refunds even more powerful. As illustrated earlier, these rebates can meaningfully boost after-tax income, and depending on the portfolio size and structure, may even offset a significant portion of the SMSF’s ongoing operating costs.
Strategic Wealth Transfer: Insights from a Financial Planner
Transferring wealth from property to shares can be a strategic move to diversify your investment portfolio, but it requires careful consideration of tax implications, suitability, and timing. Here are some important factors to consider:
1. Tax Implications of Selling Property
Before making any moves, it's crucial to understand the tax implications of selling a property and investing in shares.
Realising capital gains from the sale of property will typically attract capital gains tax (CGT). If the property has been your primary residence, you might be eligible for certain exemptions, but investment properties are generally subject to CGT. Consulting with a tax advisor can help you optimise your strategy and minimise tax liabilities.
2. Are You Comfortable with Shares or Property?
Assess whether shares are suitable for your financial goals and risk tolerance. Shares often offer higher liquidity and potentially higher returns compared to property but come with market volatility. Depending on your needs and preferences, a balanced approach rather than a full transition may be considered.
3. Timing is Key
Timing any property or share transactions can often have tax implications. Consult with an accountant and financial advisor to ensure that you’re utilising available tax offsets and timing this well with the sale of an asset.
Strategies to Manage Proceeds from Property Sales
After downsizing a home or selling an investment property, you may have excess proceeds at your disposal. Here are some strategies to consider:
1. Use the Most powerful tax structure
If you are retired, or over the age of 60, one of the most tax-efficient ways to manage excess proceeds is through superannuation.
From 1 July 2025, each person can have up to $2m in Super. Depending on their circumstance, earnings within the fund can be fully tax free. For e.g, a person who is retired with $2m in Super, is in Pension Phase and withdrawing 5% per year, should receive a tax-free income of $200,000 per annum.
2. Maximise Superannuation Contribution Limit
Planning is key to fully leverage the benefits of superannuation. There are annual caps on contributions, so advance planning ensures you can maximise your retirement savings without breaching these limits.
In addition to annual caps, there are also age limits that you need to be aware of. For example, there is an annual cap of $120,000 for Non-Concessional Contributions; however, this is not available for those aged 75 and above.
The Australian government also allows individuals over the age of 55 (with no upper age limit) to make downsizer contributions of up to $300,000 per person ($600,000 per couple) into their superannuation fund. This money can then benefit from the tax-friendly environment of superannuation, where investment earnings in the retirement phase are generally tax-free.
Contributing to Super can have significant benefits; however, careful considerations must be made before implementing this strategy, as money put into Super will be locked up until you meet a condition of release. That’s why it’s important to talk to a financial advisor for holistic planning support.
3. Alternative Strategies During Wealth Creation
If you’re selling property as part of a shift in your wealth creation strategy and cannot access superannuation funds yet, consider the ownership structure of your new investments. Holding shares in a tax-effective manner might include using a family trust or investing through a company structure to balance risk, flexibility, and tax efficiency.
Property vs Shares: The Final Say
For investors seeking strong income generation, shares present a clear advantage. While Australian residential property typically yields between 2-3% after costs, a diversified portfolio of blue-chip shares can provide a more attractive 5% yield - before the benefits of franking credits. This difference can significantly impact retirement income and financial flexibility.
As economic conditions evolve, incorporating income-producing shares into a portfolio may be a prudent strategy for those looking to optimise cash flow while maintaining liquidity and diversification.
The belief that homeownership is the ultimate path to financial security is deeply ingrained in Australian culture. While property has historically been a strong investment, shifting economic and tax conditions may mean that relying solely on real estate is no longer the optimal strategy for all investors.
Transitioning from property to shares can provide a lower-maintenance, more flexible, and potentially more lucrative investment strategy for many. It also offers investors greater control, reduced regulatory risk, and increased adaptability in managing their wealth. By understanding the benefits and implications of such a transition, investors can make informed decisions aligned with their long-term financial goals.
Work With Holistic Financial Advisors on Your Investment Strategies
At BlueRock, we guide clients through this process, providing strategic financial advice and investment management to help them build and preserve wealth. If you’re considering rebalancing your portfolio, we encourage you to seek personalised financial advice from our wealth management team. Submit the form below or reach out to the authors at the top of the page for a no-obligation discussion about your financial matters.
Disclaimer: The information in this article is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This information has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information before acting or seek advice before making any financial decisions.
