---
title: "If You're Under 35, Property Beats Shares. Here's the Mathematical Proof."
description: "Shares return 9.2% long-term. Property returns 6.8%. But with 5:1 leverage, property delivers 25%+ ROE — and it's the only asset class that forces you to hold. For young Australians, the maths is clear."
author: Yan Zhu
date: 2026-01-22
category: Guides
url: https://premiumrea.com.au/blog/young-australians-best-investment-property-not-shares
tags: ["young investors", "property vs shares", "leverage", "wealth building", "Australia", "index funds", "first property"]
---

# If You're Under 35, Property Beats Shares. Here's the Mathematical Proof.

*By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2026-01-22*

> Everyone tells you to invest in index funds. The data says shares return 9.2% versus property's 6.8%. Case closed? Not even close. Because that comparison ignores the single most important variable: leverage. And leverage changes everything.

The internet has convinced a generation of young Australians that index funds are the superior investment. And on a headline return basis, they're not wrong — the ASX All Ordinaries has averaged 9.2% per annum over the long run, including dividends. Australian residential property? 6.8% [1].

Case closed, right? Shares win by 2.4 percentage points per year. Buy the Vanguard ETF, set and forget, retire wealthy.

Except that comparison is fundamentally misleading. It compares absolute returns without adjusting for the single variable that transforms the entire equation: leverage.

Today I'm going to make the mathematical case for why property — specifically, leveraged residential property — is the optimal first investment for Australians under 35. Not because shares are bad. They're not. But because the leverage available in property turns a 6.8% return into a 25-30% return on your actual capital — and no retail share investor can replicate that safely.

## The leverage multiplier: why 6.8% beats 9.2%

Let's run two parallel scenarios with $200,000 starting capital.

**Scenario A: Shares**
You invest $200,000 in an ASX index fund. It returns 9.2% per year.
Year 1 return: $18,400.
Return on your capital: 9.2%.

You could margin lend to get leverage, but margin lending at any meaningful ratio (3:1 or higher) exposes you to margin calls during drawdowns. The ASX dropped 36% in March 2020. At 3:1 leverage, that's a total wipeout. Margin lending is available in theory but suicidal in practice for retail investors [2].

**Scenario B: Property**
You use $200,000 as a deposit (including stamp duty and costs) on a $900,000 house. 80% LVR = $720,000 bank loan.
The property grows at 6.8% = $61,200 in year one.
Return on YOUR $200,000: 30.6%.

But wait — you have to pay interest on the $720,000 loan. At 6.3%, that's $45,360 per year. Rental income at 4.5% gross yield = $40,500. Net holding cost: $4,860 per year (before tax deductions reduce this further).

So your effective return is: $61,200 growth - $4,860 net holding cost = $56,340.
Return on your $200,000: 28.2%.

Even after accounting for holding costs, property delivers triple the return on equity compared to unleveraged shares. And there's no margin call. No one can force you to sell a house because the market dropped 20%. As long as the rent covers the interest (which it does in our example), you hold through any downturn indefinitely [3].

## The illiquidity advantage (yes, advantage)

Share investing is too easy. Open an app. Tap "sell." Money in your account in two days.

This convenience is presented as a feature. For young investors, it's actually a bug. Because easy selling means easy capitulation. When the market drops 20% — and it will, repeatedly, over a 30-year investment horizon — the temptation to sell is overwhelming. And most retail investors do sell, at exactly the wrong time [4].

Vanguard's own research shows that retail investors underperform their own funds by 1.5-2% per year because of behavioural errors: buying after rallies, selling during crashes, and timing the market poorly.

Property's illiquidity is the antidote. Selling a house takes 60-90 days minimum. It involves agents, lawyers, marketing campaigns, inspections. It's expensive (agent commission: 2%, legal fees, staging). The transaction friction is enormous.

This friction forces you to be a long-term holder. And long-term holding is the single most reliable predictor of positive investment returns across every asset class. Property's illiquidity turns impatient, emotional humans into patient, disciplined investors — by making the alternative (selling) so annoying that you just... don't.

I have friends who've been in and out of the share market three times in five years. Each time they sold near the bottom and bought near the top. Net result after five years of "investing": approximately flat.

Meanwhile, the people who bought a house in 2019 and did nothing are sitting on $200,000-$400,000 of unrealised gains. Not because they were smarter. Because the asset wouldn't let them be stupid.

## The volatility tax young investors can't afford

Young investors are told they should embrace volatility because they have "time to recover." This is true in theory. In practice, volatility destroys wealth for investors who can't stay the course.

Property's annual volatility is approximately 5-8% — you might see a 5% dip in a bad year or a 10% gain in a good year. The swings are gentle enough that they don't trigger panic selling [1].

Shares? The ASX routinely swings 15-20% within a single year. Individual stocks can move 40-50%. For a 28-year-old with $50,000 invested, watching $10,000 evaporate in a week is psychologically devastating — even if the rational response is to hold.

I've sat with young clients who couldn't sleep because their share portfolio was down $15,000. I've never had a property investor call me in a panic because their house value dipped 3% on a quarterly report. The emotional experience of property investing is fundamentally more sustainable for human psychology.

And sustainability matters more than optimality. The best investment strategy is the one you actually stick with. For most humans, that's property.

## When to add shares (because you should)

I'm not anti-shares. I own shares. Shares belong in every diversified portfolio.

But the sequencing matters.

For a young Australian with $100,000-$200,000 in savings:

**Step 1 (ages 25-30):** Deploy into property. Use leverage to control $700,000-$900,000 in real assets. Generate rental income that covers holding costs. Build equity through appreciation and principal repayment.

**Step 2 (ages 30-35):** As rental income exceeds holding costs (positive cash flow), funnel the surplus into index funds. Now you're building diversification while your property portfolio compounds in the background.

**Step 3 (ages 35-45):** Use accumulated equity from properties to fund additional property purchases OR to build a substantial share portfolio. At this stage, you have enough capital that share market volatility is manageable — a 20% drop on $500,000 is painful but not existential.

The error most young Australians make is starting with shares because it's easy. They invest $50,000 in an index fund, watch it go sideways for two years, get discouraged, and withdraw. Meanwhile, that $50,000 as a deposit (with government schemes like VHF) could have controlled a $500,000 property that's now worth $535,000 — and the rent is covering the mortgage.

Leverage first. Diversify later. The mathematical case is overwhelming.

> "This world has only two types of poor people," says Yan Zhu. "Those who never use leverage, and those who use too much. The sweet spot — 80% LVR on well-selected residential property — is available to every working Australian. Shares can't offer that. No other asset class can. Use it."

## References

1. [CoreLogic / ASX, 'Long-Term Returns Comparison: Australian Residential Property vs ASX All Ordinaries', 100-year data.](https://www.corelogic.com.au/)
2. [ASIC, 'Margin Lending — Risks and Benefits', 2024.](https://moneysmart.gov.au/investments-paying-off/margin-loans)
3. [PremiumRea financial modelling. Leveraged property return vs unleveraged share return over 10-30 year horizons.](#)
4. [Vanguard Australia, 'Mind the Gap — Investor Returns vs Fund Returns', 2024.](https://www.vanguard.com.au/)
5. [Morningstar, 'ASX All Ordinaries Long-Run Returns', 2024.](https://www.morningstar.com.au/)
6. [Reserve Bank of Australia, 'Housing Price Indices — Historical Data', 2024.](https://www.rba.gov.au/statistics/tables/)
7. [Canstar, 'Home Loan Repayment Calculator', 2025.](https://www.canstar.com.au/home-loans/mortgage-repayment-calculator/)
8. [Australian Bureau of Statistics, 'Household Wealth and Wealth Distribution', 2024.](https://www.abs.gov.au/)

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Source: https://premiumrea.com.au/blog/young-australians-best-investment-property-not-shares
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent