The True Cost of Buying Property vs. Shares in Australia: Upfront & Ongoing Expenses (2025)

Author: Tepuy Solutions | Date: October 24, 2025 | Category: Investment Costs, Property Investing, Share Investing

Overview

When comparing property and shares as investments, headline returns are only part of the story. The significant differences in both upfront and ongoing costs can dramatically impact your net returns and cash flow. Property, in particular, comes with substantial transaction costs that aren't always obvious. This article details the typical expenses associated with buying and holding investment property versus investing in shares in Australia, helping you make a more informed comparison.

Upfront Costs: Property vs. Shares

Buying property involves significantly higher initial hurdles than buying shares.

Property Upfront Costs:

• Deposit: While not technically a 'cost', it's the largest cash outlay, typically 10-20% of the purchase price to secure the loan (less than 20% usually requires LMI).
• Stamp Duty (Transfer Duty): A state government tax calculated on the property's value. This is often the largest single upfront cost *after* the deposit, varying significantly by state and eligibility for concessions (like the First Home Buyer Grant).
• Lenders Mortgage Insurance (LMI): Required if borrowing more than 80% LVR. The premium depends on the loan amount and LVR tier and can cost tens of thousands, often added to the loan balance.
• Legal & Conveyancing Fees: Costs for solicitors or conveyancers to handle contracts, searches, and settlement. Typically $1,500 - $3,000.
• Building & Pest Inspections: Essential due diligence before purchase. Around $400 - $1,000 depending on property size and location.
• Loan Application/Establishment Fees: Charged by some lenders to set up the mortgage. Can range from $0 to over $1,000.
• Government Registration Fees: State fees for registering the title transfer and the mortgage. Usually a few hundred dollars.
• Other Potential Costs: Buyer's agent fees (if used), initial repairs/renovations, moving costs.

Shares Upfront Costs:

• Brokerage Fee: Charged by your broker (online or full-service) for executing the share purchase. Typically ranges from $5 to $30 per trade for online brokers, or a percentage for larger trades via full-service brokers.
• CHESS Sponsorship Fee (Minor): Some brokers might have a small annual fee for CHESS sponsorship, but often waived.

Key Difference: Buying property involves substantial, often unavoidable government taxes and professional fees that can amount to 4-7% (or more) of the property's value *on top* of the deposit. Buying shares has minimal upfront friction costs, primarily low brokerage fees. Your Property vs Shares Calculator models many of these property costs directly.

Ongoing Costs: Property vs. Shares

Holding costs also differ significantly, impacting annual cash flow and net returns.

Property Ongoing Costs:

• Loan Interest Payments: Usually the largest ongoing expense, especially in the early years of the loan.
• Council Rates: Levied by local government for services. Typically $1,500 - $4,000+ per year.
• Water Rates: Access and usage charges. Can be partially passed to tenants in some states. $800 - $1,500+ per year.
• Strata/Body Corporate Fees (Apartments/Townhouses): Covers maintenance of common areas, building insurance, and administration. Can range from $2,000 to over $10,000 per year depending on the building's age and amenities.
• Landlord Insurance: Protects against property damage, loss of rent, and liability. ~$400 - $1,000+ per year.
• Building Insurance (Houses): Required by lenders. Cost varies based on location, size, and construction.
• Repairs & Maintenance: Essential upkeep (plumbing, electrical, painting, etc.). Often budgeted as 0.5% - 1.5% of the property value per year.
• Property Management Fees (if using an agent): Typically 7-10% of gross rental income plus letting fees.
• Land Tax: State tax payable by investors on the unimproved value of land holdings above a certain threshold (exempt for principal place of residence). Varies significantly by state.

Shares Ongoing Costs:

• Management Fees (Managed Funds/ETFs): If investing via funds or ETFs, the Management Expense Ratio (MER) covers investment management, administration, etc. Typically 0.1% to 1.5%+ per year, deducted from fund performance.
• Brokerage Account Fees (Less Common): Some brokers might charge inactivity fees or annual account fees, but many online brokers do not for basic accounts.
• Margin Loan Interest (if applicable): If borrowing to invest, interest costs are ongoing (though potentially tax-deductible against investment income).

Key Difference: Investment properties generally have far higher and more numerous ongoing expenses than a typical share portfolio (especially one held directly or via low-cost ETFs). These costs directly impact the property's net yield and cash flow. Shares have fewer direct holding costs, with management fees being the most significant for fund investors. The Property vs Shares Calculator includes inputs for many of these ongoing property costs.

Don't Forget Selling Costs!

While not ongoing, costs incurred when *selling* also differ:

• Property Selling Costs: Real estate agent commissions (typically 1.5-3% of sale price), marketing/advertising costs, legal fees. These significantly reduce net proceeds.
• Shares Selling Costs: Brokerage fee per trade (similar to buying).

Conclusion: Model the Full Picture

When comparing property and shares, it's crucial to account for the full spectrum of costs – both upfront and ongoing. Property's high transaction costs create a significant initial drag on returns, while its substantial ongoing expenses impact cash flow. Shares offer lower cost barriers but come with their own considerations like management fees and potential margin loan interest.

Ignoring these costs can lead to overly optimistic projections, especially for property.

Run Your Numbers

To accurately compare these investments considering all relevant costs and tax implications in the Australian context, use the Tepuy Solutions Property vs Shares Calculator.

• Input detailed upfront property costs (stamp duty is calculated automatically).
• Specify ongoing property expenses as a percentage of property value.
• Model the impact of these costs on cash flow and final net wealth compared to investing the same initial capital in shares.

Understanding the true cost is the first step towards making a truly informed investment decision.