Property has long been considered the great Australian dream, but superannuation offers significant advantages, especially when it comes to long-term wealth building. So, which is the better investment option for you, property or super? Let’s break it down.
Is property a good investment?
Investment property is a popular choice because of leverage, you can borrow money to buy something much larger than what you could afford outright. Leveraging means your returns are based on the total property value, not just your initial investment. Rental income can also provide a passive revenue stream, alongside potential tax benefits; such as negative gearing (which allows you to offset property-related expenses against your taxable income).
Pros:
- Leverage: borrowing to invest in a larger asset
- Rental income potential
- Tax advantages for investment properties (not your primary place of residence) such as negative gearing and depreciation deductions
However, property comes with some major challenges. It requires a large upfront deposit, ongoing costs such as maintenance, insurance, and rates, and it lacks liquidity—meaning it’s not easy to sell quickly if you need cash. Interest rates and property prices fluctuate, and there’s always the risk of bad tenants or rental market downturns.
Cons:
- High initial investment outlay: such as deposit, stamp duty, legal fees
- Ongoing expenses: unforeseen and routine maintenance, rates, insurance, property management
- Low liquidity: it can take time to sell
We’ve previously compared investment property vs shares, comparing and contrasting wealth building using these two methods.
Can super be a smarter long-term investment?
Superannuation is one of the most tax-effective ways to grow wealth in Australia. Investment earnings within super are taxed at just 15%, compared to up to 47% if you invest outside super and fall in the top tax bracket. Over time, compounding growth can turn even small contributions into a substantial retirement nest egg.
Pros:
- Low tax rates: 15% inside super vs up to 47% outside
- Compounding growth over decades until your retirement
- Diversified investments: reducing overall risk
However, the biggest downside of super is that it’s locked away until retirement. Unlike property, you can’t access your funds early if you need them for other expenses. Additionally, while the tax benefits of super are strong, capital gains tax (CGT) discounts on investments outside super (such as shares held for over 12 months) can reduce the gap between the two options.
Cons:
- Funds locked away until retirement age
- No physical asset ownership you can’t touch or visit your tangible asset
Benefits of Investing outside super
If neither property nor super alone meets your needs, another option is investing in a diversified portfolio outside super. This approach offers more flexibility, requires a lower initial investment, and has fewer ongoing costs than property. While you miss out on leverage, you gain access to your money at any time and can take advantage of the 50% CGT discount on assets held for more than a year.
Pros:
- More flexible than super: access funds when needed
- Lower ongoing costs than property: no stamp duty, maintenance, or insurance fees
- Can start with a small amount and build over time
Cons:
- Generally no leverage: meaning slower capital growth compared to property (there are leveraged investing options, but these do carry greater risk and can be expensive)
- Higher tax rates than super but CGT discount still applies
So, which is better?
The right choice depends on your financial goals. If you want immediate flexibility and the potential for capital growth outside super, investment property might be the way to go, but it comes with risks. If you’re thinking long-term and prioritising tax efficiency, contributing more to your super could be a smarter strategy.
For those looking for a balance, investing in a diversified portfolio outside super provides a middle ground. It offers more accessibility than super and fewer financial commitments than property.
Before making a decision, it’s important to consider your risk capacity, investment timeline, and financial goals. If you’re interested in learning more about how Stockspot can help you build a brighter financial future, via our super or investing products, speak to one of our investment advisers today.
Disclaimer: Stockspot ABN 87 163 214 319 is a licensed Australian Financial Services provider (AFSL 536082) regulated by ASIC. Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs except in circumstances where you have provided your personal financial details via our online application process and received a Statement of Advice from us. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate taxation and legal advice. Past performance of financial products is no guarantee of future performance. Please read our Financial Services Guide before deciding whether to obtain financial services from us.
Stockspot Super is offered as the Stockspot MDA on Super Simplifier. Before opening an account please read the Stockspot FSG, Stockspot Super MDA Guide, and the Super Simplifier PDS and Supplementary PDS, along with other relevant disclosure documents including your personalised Statement of Advice (SOA) and Investment Agreement.
