Shares vs Property: Which Is the Better Investment in New Zealand - The Complete 2025 Guide

We explain whether shares or property is the smarter choice for building wealth in New Zealand - we look at returns, risks, costs, and lifestyle impacts to help you make the right decision for financial freedom.

Updated 1 July 2025

Summary

Shares, including index and managed funds, are a popular investment option for most New Zealanders. The fees have never been lower, and they offer diversification, liquidity, low maintenance, and accessibility.
Property's leverage and tax-free capital gains have made it a "Kiwi favourite" for many decades. Still, high costs, concentration risk, problematic build quality, tenant issues, and management demands have, in some cases, made it less appealing to potential investors.
This guide assumes you're investing for wealth-building, not buying a home to live in, and is designed to help you make an informed choice about what's best for you.
At MoneyHub, we're occasionally asked if we're "anti-property." Let us be clear: we're not. We are objective and deeply value the stability that come with owning your home. We also recognise that investment properties are a popular choice for many New Zealanders seeking wealth-building opportunities.
Our guides, including our dedicated Property Investment Risks Guide, are designed to empower everyday New Zealanders with the knowledge to avoid costly mistakes, not to discourage property ownership. MoneyHub Founder Christopher Walsh is both a homeowner and an investor in property, and it offers diversification.
Our stance is simple: informed investing is essential before proceeding. You need to be aware of the risks upfront, as shares, funds, and property can all be poor investments without careful planning and consideration.
The difference between financial freedom and stress often boils down to this - can you invest in a way that grows your wealth without draining your time or tying all your money to one asset? Shares and funds offer global diversification, quick access to cash, and minimal hassle, while property can lock you into a cycle of costs and management.
With platforms like Simplicity, Kernel and InvestNow for funds, Tiger Brokers, Sharesies, and Hatch for shares, and top-performing KiwiSaver funds showing strong returns of 10% or more, exploring options beyond property becomes an attractive option.

Our View: Property has long dominated New Zealand's investment landscape, but its shine may be fading. With national house prices staying flat over 2023 to 2025, interest rates at 5-7%, council rates rising 4-7% annually and insurance costs increasing, many rentals lose money weekly on a cashflow basis.

Meanwhile, global share markets, through index funds, have averaged annual returns of 7-10% after tax over the decades, offering a simpler and more resilient path to wealth. While most investors won't borrow money to build wealth in funds and shares, whether you're starting with $50 or $500,000, shares allow you to invest without tying up your life savings in a single asset.

To help you decide, our guide covers:

Know This First: Investment Property vs Homeownership

This guide focuses on investment property versus shares for wealth building, not on whether you should buy a home to live in. We are bullish towards New Zealanders buying an affordable home that makes them secure without over-borrowing.

However, the question here is what to do with your extra capital after securing your own home or if you're choosing between saving for an investment property versus building wealth through shares and funds.

Our View: What Social Media/Reddit Gets Right (And Wrong) About Property vs Shares
If you've spent time on r/PersonalFinanceNZ or r/newzealand, you've seen these arguments dominate every property vs shares discussion:

"Property is easier to leverage" - This gets upvotes every time, and it's a true statement. Banks will happily lend you 80% to buy a rental property but won't lend you money to buy shares. Leverage can amplify returns spectacularly when property prices rise 10-15% annually, as they did for decades.
"Property is good because you earn both rent and capital gains" - Another crowd favourite that oversimplifies the equation. Yes, you can earn from both sources, but this overlooks the fact that many rentals are cash flow negative (rent doesn't cover all costs), and capital gains have stalled in many areas. Auckland's 0.5% growth in 2023, for example, makes it tough to cover the costs of running the rental.

What social media and online comments often miss:

The total cost of property ownership (rates rising 4-7% annually, insurance doubling in some areas, maintenance averaging $10,000+ yearly, while rents don't go up as much or can fall
How global share markets have outperformed NZ property over the past 20 years
The opportunity cost of tying up $200,000+ in a deposit versus investing that capital in diversified markets
The mental load and time investment required for successful property management

Our View: Both property and shares can build wealth, but today's economic conditions have significantly altered the game. Our guide cuts through the noise of family members, online contributions, and friends to give you the full picture, including costs, risks, and lifestyle impacts that are often overlooked in online discussions.

MoneyHub Founder Christopher Walsh Comments on Shares vs Property

"The hard truth about investing in New Zealand? Property isn't the sure-fire winner it was 20 years ago. I speak with New Zealanders every week who have invested almost all of their lifetime earnings in their homes and rentals and have seen huge tax-free returns over 20 years or more. However, they now face soaring council rates, higher landlord insurance renewals, and maintenance bills that eat into their returns.

Meanwhile, those who diversified into shares, particularly low-cost global index funds, are seeing steady growth without the midnight calls about, for example, a dripping pipe, blinds needing to be replaced, an issue with a microwave and/or a driveway that's not quite as it should be.

Of course, you can borrow money to invest in property to boost gains, but it's a double-edged sword - if prices drop 20%. In parts of New Zealand, your equity (e.g., deposit) can vanish, and you're still paying interest rates of 6% or more per annum, as well as repaying the balance you borrowed.

Shares and funds, by contrast, let you start with one dollar, spread your risk across thousands of companies, and sell in days, not months. I've seen too many investors become 'asset-rich, cash-poor,' stuck with properties they can't afford to maintain but don't want to sell because of the 'loss' they'll suffer from the 'highs' of previous year's property prices.

However, this liquidity in share markets can be a double-edged sword. Inexperienced share investors often panic-sell during market downturns, locking in losses that might have recovered given time. Property's illiquidity, while frustrating when you need cash, can force investors to ride out market volatility, as selling requires months of complex and expensive processes. This natural barrier to impulsive decisions may inadvertently protect property investors from their own worst instincts during turbulent times.

My biggest worry is New Zealand's obsession with property. Betting your future on one investment property in one suburb is like investing all your money in a single share; it's arguably a reckless move, even if you'll be reminded by those involved in such an investment that gains are 'tax-free' and you can borrow to 'multiply the profits' when you sell.

Shares and funds aren't flawless; market dips, and there is always the risk of another Global Financial Crisis. However, shares and funds are simpler, more flexible, and, for many investors, better suited to the economic reality of 2025 and beyond. However, the security of owning the home you live in is unrivalled, and we encourage every New Zealander to work towards becoming a homeowner".

Christopher Walsh
MoneyHub Founder

Know This: The debate between shares and property investing has never been more critical, and there are several key considerations to take into account.

Our comprehensive comparison guide, created with insights from our friends at Lighthouse Financial, reveals the real costs, returns, and lifestyle impacts of both investment strategies. We cut through the noise to help you make an informed decision based on today's economic reality.

Lighthouse Financial provides personalised financial planning and advice that puts your goals first. Before giving advice, Lighthouse takes the time to understand what matters most to you.
Their services include comprehensive investment strategies, property planning, KiwiSaver optimisation, and portfolio diversification - helping you build wealth whether you choose shares, property, or a balanced approach.
If you're deciding between property and shares for wealth building, understanding your complete financial picture is essential. Learn more about Lighthouse in our in-depth Lighthouse Financial review or visit their website.

Important: MoneyHub presents Lighthouse Financial as a trusted and well-regarded comprehensive financial advice service; however, this does not constitute an endorsement or recommendation. We encourage all readers to carefully and thoroughly compare financial advisers and fully understand their fee structures before making any decisions. You can also read our review of Lighthouse Financial.

Visit Lighthouse Financial

The Real Costs and Returns of Shares vs Property

Choosing between shares and property begins with understanding their returns, costs, and how they align with your goals. We explain what you need to know below.

Shares and Funds: Global Growth, Minimal Effort

Investing in shares and funds means owning a part of a company, typically through platforms like Simplicity, Kernel and InvestNow for funds, Tiger Brokers, Sharesies, and Hatch for shares. Low-cost index funds or exchange-traded funds (ETFs), such as the S&P 500 (VOO) or Vanguard Total World Stock (VT), provide exposure to thousands of businesses worldwide.

Returns: Historically, global index funds have delivered annual returns of 7-10% after taxes over long periods. The S&P 500 averaged 9.8% annual returns over 20 years (2003-2023), including dividend yields of 1-2%. New Zealand's NZX 50 has averaged 6-8% annually, but global funds offer broader diversification.

Costs and Considerations:

Platform and Brokerage Fees: These depend on the platform you use, but they can be as low as 0.10% for larger portfolios. Our guide to investing in index funds, US ETFs and US shares and ETFs has more information.
Fund Fees: Simplicity and Kernel funds charge 0.10-0.25% annually, while active funds, such as Milford and Pie Funds, charge around 1%.
FIF Tax: The Foreign Investment Fund (FIF) tax applies to overseas shares and ETFs exceeding $50,000, taxing 5% of the value of your holdings annually, equivalent to 1-1.5% of returns.
Accessibility: Investing in shares, ETFs, and funds has never been more affordable; you can start with as little as $1, using, for example, Kernel. Best of all, investors don't need a deposit or loan approval, unlike when starting a property investment.
Liquidity: Sell shares and funds in 1-2 days, providing quick access to cash for emergencies or opportunities.
Diversification: A single fund or ETF usually covers dozens, hundreds or thousands of companies across various industries and countries, thereby reducing risk compared to a single investment.

Know This: Shares and funds are arguably favoured by investors who want steady growth without tying up large sums or managing assets. A $50,000 investment at an 8% annual return grows to approximately $108,000 in 10 years, with minimal effort and predictable costs.

Property: Leverage with High Costs

Property investment typically involves purchasing a rental or investment property, often with the assistance of a mortgage. New Zealand's property market has been a cultural obsession, driven by tax-free capital gains and generous leverage from banks all too willing to lend. However, we believe the costs and risks are significant.

Returns: Auckland house prices grew 5.83% annually from 2003-2023 (REINZ) but only 0.5% in 2023, signalling a slowdown. With 5X leverage (a 20% deposit), a 5% price increase becomes a 25% return on equity minus interest and costs. Rental yields average 5% to 8% nationally, though targeted renovations in cities like Christchurch or Dunedin can push yields higher.

Costs and Considerations:

Mortgage Interest: A $800,000 loan at 6% (2025 average) costs approximately $48,000 per year in interest, often exceeding rental income.
Council Rates: Auckland rates average $3,000 or more per year and are determined by a property's value, with an annual increase of 4-7%, according to TaxPayers' Union research.
Insurance: Home insurance costs $2,000-$4,000+ per year, with premiums doubling in areas prone to floods or earthquakes.
Maintenance: Older homes require $5,000-$20,000/year for repairs (e.g., roofing, plumbing). Major renovations (e.g., kitchens, bathrooms) cost $30,000-$100,000 or more every 15-20 years.
Property Management: Professional managers charge 8-10% of the rent, or approximately $2,400-$3,000+ per year for a $600 weekly rental.
Legal and Transaction Fees: Buying costs need to be factored in - this includes inspection fees and conveyancing, while you need to allow for real estate agent costs 2-3%+ when you sell.
Accessibility: Requires a 20-40% deposit ($150,000-$400,000 for a $1 million property), plus loan approval, which limits entry to high earners, savers, or those who want to utilise the equity in their homes.
Liquidity: Selling can take weeks to months, with significant fees, which delays access to capital. The speed often depends on the price, location, season and interest rates on offer.
Diversification: A single property ties your wealth to a single asset in a single market, making it vulnerable to local economic shifts or natural disasters. Should a street you invest in become problematic and renting there become less desirable, you're stuck and need to 'make it work' to keep the rent coming in to cover all the costs associated with property rental.

Our Comparison Table below makes the differences, risks and costs clear:

Feature	Shares & Funds	Investment Property
Minimum Investment	$1	$150,000+ deposit
Liquidity	1 to 2 days	Weeks to months
Diversification	High	Low
Passive Management	Yes	Rarely
Historical Returns	7–10%	5–6% (leveraged), based on capital gains
Risks	Market movements	Interest rates, cashflow, tenants

Property vs Shares and Funds - How Gains Come with Ongoing Costs and Time Investment

Property's appeal lies in capital gains, but high costs erode returns. To illustrate this, we consider a simple example of starting with a $200,000 investment in property and shares to see what can happen.

Disclaimer: The example comparison below is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Property

Property Growth: A $1 million property with a $200,000 deposit, growing at 5% annually (REINZ's 2003-2023 Auckland average), could reach around $2 million in 20 years, a $1 million gain (25% annual return on equity with 5x leverage).
Property Costs: An $800,000 mortgage at 6.5% (~$52,000/year interest), plus rates (~$5,000, rising to ~$13,000 by 2045), insurance (~$3,000), maintenance (~$10,000/year), and management (~$3,000/year), totals ~$73,000/year, far exceeding ~$26,000/year rent, requiring a ~$47,000/year top-up.
Property Net Gains: Over 20 years, costs (including deductible interest) total approximately $1.2 million, resulting in a net gain of approximately $800,000 after accounting for inflation.

Shares Growth and Net Gains: A $200,000 S&P 500 fund, via Kernel or InvestNow, growing at over 7% annually between January 1, 2004, and December 31, 2023 (20 years) with dividends reinvested, reaches approximately $1.2 million in 20 years, resulting in around a $1 million gain.
Shares Costs: Minimal costs (platform fees, fund fees, taxes) preserve returns with no maintenance or tenant issues.

Our View: Property's leveraged gains demand heavy cash flow, while shares, funds, and ETFs offer similar returns with low upkeep, making funds and ETFs a popular choice for most New Zealanders looking to build long-term wealth and a path to financial freedom.

The Hidden Risks Most Shares and Property Investors Miss

Investing is about more than returns; it's about avoiding pitfalls that can derail your wealth. Here are the risks that catch many Kiwis unprepared.

Shares Risks

Market Volatility: Share prices can drop 20-30% in a market crash (e.g., the 2008 Global Financial Crisis, the 2020 COVID-19 dip). Long-term investors recover, but selling during a dip will lock in your losses.
FIF Tax Drag: For portfolios exceeding $50,000, FIF tax deducts 5% of the annual value of foreign holdings, even without gains, reducing returns.
Overtrading: Chasing hot shares, sectors, or trends (e.g., tech, crypto, and cannabis-related ventures) often leads to losses. Active trading also racks up fees, eroding returns.
Currency Risk: Investing in foreign shares exposes you to fluctuations in the NZD. A stronger NZD can reduce returns when converting profits back into New Zealand dollars. However, you can invest in forex-hedged funds to minimise this risk - our guide to hedging explains more.

Property Risks
There are several risks, which we have covered in a dedicated guide, essential reading. Overall, significant risks include:

Concentration Risk: Tying your wealth to a single property in a single suburb leaves you vulnerable to changes in the area and how well it rents out.
Illiquidity: Selling a property can take weeks to months, with agent fees ranging from 2% to 4%. If you need cash quickly, you're out of luck.
Negative Cashflow: Many rentals require weekly top-ups. An $800,000 mortgage at 6.50% with $500/week rent leaves around a $400/week shortfall, draining savings.
Unexpected Costs: Leaky homes, council rate hikes (ranging from 4% to 7% annually), or insurance spikes can cost tens of thousands, wiping out gains.
Tenant Risks: Non-paying tenants, property damage, or vacancies can result in significant financial losses and cause considerable stress.
Interest Rate Risk: Rising rates increase mortgage costs, squeezing cash flow. A 1% rate hike on an $800,000 loan adds $8,000/year in pre-taxed repayment costs.

Warning: Property investment's biggest trap is assuming historical gains (e.g., 5-6% annually) will continue. With flat prices and flat interest rates, many investors who purchased a property between (around) 2015 to 2023 are losing money every week and we expect this to continue.

Leverage: Property's Biggest Advantage Is Also Its Riskiest

Leverage (borrowing to invest) is property's key draw, but it amplifies both gains and losses.

How It Works: A $200,000 deposit on a $1 million property lets you benefit from gains (or losses) on the full $1 million. A 5% price increase ($50,000) is a 25% return on your deposit. A 5% drop ($50,000) wipes out 25% of your equity.
Property Leverage: Banks typically lend 60-80% of the purchase price for investment properties, but the repayment costs often exceed the rent, requiring top-ups. Tax-deductible interest (reinstated by the 2023 National Act government) helps, but cash flow remains tight.
Shares Leverage: Margin loans (e.g., via Tiger Brokers or Interactive Brokers (IBKR) or leveraged ETFs (e.g., 3x S&P 500) amplify share returns but are riskier due to volatility and margin calls. Our guide to borrowing to invest outlines the risks.
The Risks: A 20% property price drop on an $800,000 mortgage eliminates your $200,000 deposit, leaving you underwater. Shares leverage can trigger margin calls during market dips, forcing sales at a loss. Our view is that investing with a margin account is significantly riskier and has a substantial downside, even if you believe your investment strategy is robust.

Know This: Leverage makes property appealing for those chasing big gains, but in a flat or falling market, it's a gamble. Shares and funds' unleveraged returns are steadier, requiring less capital and stress.

Lifestyle and Mental Load: Which Investment, Shares or Property, Fits Your Life?

Investing isn't just about money; it's about how it impacts your time, energy, happiness and general peace of mind.

Shares and Funds: Low-maintenance and arguably suited to busy New Zealanders, retirees, or those living overseas. Many set up auto-investments in a global ETF or PIE fund, check their balances from month to month and move on with their lives. Platforms like Kernel, Sharesies and InvestNow make it simple.
Property: A hands-on investment, even with professional managers. You'll handle tenant requests, repairs (e.g., broken hot water cylinders), and unexpected costs (e.g., over $5,000 in roof leaks). Managing a rental property requires time and ongoing decision-making.

Know This: Shares and funds suit those who want wealth without work, offering flexibility to live anywhere and focus on life, not assets. Property is ideal for investors who enjoy active management or renovations and can handle the mental demands of a 'part-time' second job.

Lighthouse Financial provides personalised financial planning and advice that puts your goals first. Before giving advice, Lighthouse takes the time to understand what matters most to you.
Their services include comprehensive investment strategies, property planning, KiwiSaver optimisation, and portfolio diversification - helping you build wealth whether you choose shares, property, or a balanced approach.
If you're deciding between property and shares for wealth building, understanding your complete financial picture is essential. Learn more about Lighthouse in our in-depth Lighthouse Financial review or visit their website.

Visit Lighthouse Financial

Shares vs Property Investment NZ - Tips for Building Wealth

Our Five Must-Know Tips for Building Wealth

Christopher Walsh comments: "The tips listed below are your roadmap to wealth. I've seen investors flourish by diversifying, starting small, and keeping costs low while being consistent with their contributions; others, however, struggle after betting it all on a single rental property. I don't believe property is the easy win it was in the 2000s, and shares, funds and ETFs offer you freedom, both financially and mentally. While I hold property investments, my focus is on funds and a (limited) number of growth shares.

Diversify Beyond Property

Don't tie your wealth to one house or suburb. Spread risk with global index funds, managed funds and tax-efficient ETFs to protect against local market slumps or disasters.

Start Small and Stay Consistent

You don't need $100,000 to invest in shares. Begin with $50 per month on a platform like Kernel, Simplicity Investment Funds or InvestNow, building wealth over time through regular contributions and compounding returns.

Master Your Tax Obligations

Understand FIF tax (5% on foreign shares above $50,000) and bright-line rules (two years for property). PIE funds reduce tax complexity for shares, while property gains are tax-free outside the bright-line test, but illiquidity offsets this advantage.

Account for All Costs

Property's hidden expenses, rates ($4,000-$8,000/year), insurance ($2,000-$4,000), and maintenance ($5,000-$20,000) can exceed $20,000 annually. Shares and funds incur costs (fees, foreign exchange, and FIF tax), but these are lower and more predictable.

Match the costs of Your Risk and Lifestyle

If you dislike market fluctuations, consider investing in broad index funds for stability and security. If you love hands-on control, property might appeal, but be ready for tenant issues, repairs, and time demands.

Our Conclusion

Building wealth in New Zealand doesn't have to mean putting all your eggs in one rental property basket. Shares and funds offer:

Global Diversification: Spread risk across thousands of companies, not one suburb.
Liquidity: Access your money in days, not months.
Low Maintenance: No tenants, no repairs, no stress.
Strong Returns: 7-10% annually, rivalling leveraged property with less risk.

Property can still play a role for hands-on investors with significant capital, but its high costs, illiquidity, and risks make it a more challenging proposition. There is a large supply of unsold townhouses. Organisations like Simplicity Living are rolling out our huge build-to-rent projects meaning more rentals are available. With interest rates around 5-7%+ p.a. and rates bills rising 4-7% annually, many rentals are cash flow negative, draining savings instead of building wealth. Shares and funds, accessible through low-cost, high-quality platforms, let you start small, grow steadily, and live life on your terms.

The debate between property and shares will continue to be a topic New Zealanders. However, your financial future will be determined by the choices you make today. Don't rush into anything - you're investing for the long term.

Frequently Asked Questions

Should I invest in individual New Zealand shares or stick to index funds and managed funds?

For most New Zealanders, broad index funds are the smarter choice. Picking individual New Zealand shares requires extensive research and exposes you to company-specific risks. The NZX 50 has underperformed global markets, returning around 6-8% annually, compared to 9-10% for global indices. If you're determined to invest in individual shares, limit them to 5-10% of your portfolio and focus on established companies with strong dividend histories, like Contact Energy or Meridian Energy.

What about KiwiSaver - should this influence my decision between property and shares?

Yes - your KiwiSaver is likely already invested in shares, bonds, and some property through diversified funds. Top-performing KiwiSaver growth funds have delivered returns of 10% or more over recent years. This means you're already building wealth through shares via KiwiSaver. Adding a rental property creates concentration risk while contributing extra to KiwiSaver or investing in similar funds outside of KiwiSaver helps maintain diversification.

I'm approaching retirement - should I switch from shares to property for 'security'?

This common misconception can be costly. Property isn't inherently safer - it requires active management, has high transaction costs, and ties up capital. A 65-year-old dealing with problem tenants or major repairs faces significant stress. Well-diversified share portfolios with dividend-focused funds can provide steady income without the hassles. Consider shifting to more conservative funds or dividend-paying shares rather than taking on property management responsibilities.

What if I want to do both - can I invest in shares AND property?

Diversification across asset classes can be a smart move, but ensure you're not overextending yourself. Many successful investors hold both, but they typically establish a solid foundation in one area before doing so. If you're leaning towards both, consider starting with shares or funds to build a foundation, then potentially adding property later when you have more capital and experience. Avoid the mistake of stretching yourself thin across multiple mortgages while neglecting other investments.

Are there any tax advantages to property that make it better than shares?

Property's main tax advantage is tax-free capital gains (outside the bright-line period), whereas shares are subject to FIF tax on foreign holdings exceeding $50,000. However, property's tax advantages are eroding - mortgage interest is tax-deductible again, but this doesn't help with cashflow if your rental is losing money every week.

Meanwhile, PIE funds offer tax-efficient investing in shares, and the simplicity often outweighs the tax benefits of a property investment. Don't let the tax tail wag the investment dog - focus on after-tax returns and your overall financial position.

I only have $500 saved - can I start investing in shares when everyone says you need a house deposit first?

Absolutely, and this might be your smartest move. While your friends are saving $200,000 for a property deposit, you can start building wealth immediately with platforms like Kernel or InvestNow. That $500 in a global index fund, growing at 8% annually with regular $100 monthly contributions, becomes approximately $28,000 in 10 years. Meanwhile, saving for a house deposit in Auckland could take 10+ years, during which house prices might outpace your saving ability. Shares and funds allow you to build wealth while saving for your first home rather than waiting until after.

My parents made a lot of money from property - is it a mistake to consider shares instead?

The game has changed. Twenty years ago, houses in Auckland, for example, cost 3-4 times the average income; today, it's 8-10 times. Your parents likely bought when mortgage rates were higher, but house prices were much lower, and they benefited from decades of price growth.

Today's reality is that many rentals are cashflow negative and lose their owners money after all costs, requiring constant top-ups from your salary. This interest.co.nz article from June 2024 explains the issues. Global index funds have outperformed New Zealand property over the past 20 years (S&P 500: 9.8% vs Auckland property: 5.83% annually). By investing in shares and funds, you're not rejecting their wisdom - you're adapting to today's market conditions.

I'm terrified of losing everything in a sharemarket crash - isn't property safer?

Your fear is understandable, but property crashes, too - and you can't diversify as easily. The 2008 Global Financial Crisis saw share markets drop 40% but recover within 5 years. Property markets also fell (with some Auckland areas dropping by 15% or more), but they took longer to recover.

With shares, you can invest across thousands of companies in dozens of countries - if New Zealand struggles, your US, European, and Asian holdings might thrive. Property ties you to one house, one street, one city. The real risk isn't market crashes - it's putting all your wealth in one asset class.

I want to leave something tangible for my kids - isn't a house better than 'numbers on a screen'?

Your heart's in the right place, but wealth is wealth regardless of its form. A rental property might feel more "real," but it comes with council rates that have risen 4-7% annually, insurance costs that have doubled in some areas, and maintenance bills that can exceed $20,000 unexpectedly.

Meanwhile, a diversified share portfolio grows quietly in the background, requires no midnight phone calls about broken hot water cylinders, and can be easily divided among children. Your kids will inherit either a property with ongoing costs and management headaches or a portfolio that pays dividends and grows globally. Which gives them more freedom?

Can I make enough from shares without leverage?

Property lets me borrow 5X my deposit."Leverage is property's superpower and its kryptonite. Yes, a 5% property gain on 5X leverage gives you 25% returns on your deposit - when prices rise. However, Auckland's growth is flat, as it around New Zealand, and if the growth was 0.50%, it would most likely result in an investor return of 2.5% before deducting interest, rates, insurance, and maintenance costs. Many investors lose money as this RNZ article explains.

Shares don't need leverage when the underlying returns are stronger - the S&P 500's unleveraged 9.8% annual average beats most leveraged property returns after costs. Plus, you avoid the stress of negative cash flow and the risk of being underwater if prices fall.

My investment property is cash flow negative - should I sell or hold and hope prices recover?

This is your wake-up call to reconsider your strategy. If you're feeding $400+ per week into a rental property, hoping for capital gains that may never come, you're essentially making a leveraged bet on one suburb's future. That $20,000+ annual top-up invested in global index funds could grow to substantial wealth over time without the stress.

If Auckland prices stay flat for another 5 years (not impossible given current conditions), you'll have lost $100,000+ in top-ups plus opportunity cost. Sometimes, the bravest decision is cutting losses and redeploying capital more efficiently, so think carefully about what you want to do.

I'm property-rich but cash-poor - should I diversify into managed funds?

If you own valuable property but struggle with cash flow, you're facing one of real estate investing's biggest drawbacks: illiquidity. Here are your main options:

Gradual diversification: Consider selling one property and reinvesting the proceeds into diversified managed funds. This provides you with liquid assets that you can access quickly while maintaining some property exposure. You'll face transaction costs and potentially Bright-Line costs, but gain flexibility and instant diversification across thousands of companies.
Equity release: Use your property equity to invest in shares alongside your real estate. This allows you to diversify without selling, although it increases your debt and risk if property values decline.
REITs as a bridge: Real Estate Investment Trusts offer property exposure with share-like liquidity. You get real estate returns but can sell within days if needed.
The cash flow reality: Managed funds typically provide better cash flow through dividends and the ability to sell portions when needed. Property might appreciate more over time, but it won't help with immediate expenses or emergencies.

Our View: If you're regularly stressed about cash flow or can't sleep at night because all your wealth is tied up in property, some diversification into liquid investments may appeal. The peace of mind and financial flexibility often outweigh the transaction costs of rebalancing your portfolio.

I love the idea of passive income from dividends - but isn't rental income more reliable?

Rental income feels reliable until it isn't. Tenants can stop paying, properties can sit vacant, and major repairs can wipe out months of rent. Dividend income from quality companies or index funds is often more consistent. Dividend-generating companies have paid their investors reliable dividends for decades through multiple recessions.

A $500,000 portfolio of dividend-paying shares may yield $15,000-$ 25,000 annually without tenant hassles, maintenance costs, or vacancy periods. Additionally, dividends tend to increase over time as companies expand globally, whereas rental income is limited by local wage growth.

Lighthouse Financial provides personalised financial planning and advice that puts your goals first. Before giving advice, Lighthouse takes the time to understand what matters most to you.
Their services include comprehensive investment strategies, property planning, KiwiSaver optimisation, and portfolio diversification - helping you build wealth whether you choose shares, property, or a balanced approach.
If you're deciding between property and shares for wealth building, understanding your complete financial picture is essential. Learn more about Lighthouse in our in-depth Lighthouse Financial review or visit their website.

Visit Lighthouse Financial

Related resources:

Our guide to Financial Advisers outlines all you need to know about their role in your investing. We also have dedicated guides for cities all over New Zealand: