How much passive income will I get from shares vs. property?

Passive income is one of the greatest benefits of investing because it is generated while you sleep.

All you need to do is hold the asset and the passive income will simply flow into your bank account.

How lovely.

But how much passive income will you get by investing in ASX shares vs. property?

Well, this is going to be fun.

Let's compare the current gross rental property yields on offer around the country vs. the dividend yields being paid by some of the best income shares on the ASX.

Ready?

Shares vs. property passive income comparisons

Let's start with the passive income on offer from investment property around Australia today.

The first thing to note is that rents have skyrocketed by an average of 9.1% per year for the past three calendar years, according to CoreLogic data.

That means landlords have received a near-30% boost to their passive income over this short period.

CoreLogic's national median rent reached $601 per week in December. This equates to a median annual passive income of $31,252 a year.

Back in August 2020, the median rent was $437 per week. So, landlords are now receiving $8,000 more in median passive income today on the same unimproved asset.

Several factors have contributed to this unusually large rise in rents.

Among them are reduced household sizes (i.e., fewer people per dwelling) and big population growth driven by migration.

There was also a notable decline in investor purchases and a rise in the number of investors selling for a period last year.

Longer-term factors are also in the mix, such as a reduction in social housing supply and wages growth not keeping up with rental growth.

So, here's the state of play on passive income via shares vs. property.

Rental returns of houses

Here are the current gross rental yields of houses across the country.

Rental returns of apartments

Here are the current gross rental yields of apartments across Australia.

Passive income via dividends

As you can see above, rental yields are generally pretty strong. But remember these are gross yields, which means all the holding costs associated with property investment have not been deducted.

That's a key difference between shares vs. property — there are no ongoing holding costs with stocks.

Now, let's discuss dividend yields and compare them to the rental yields above.

The average dividend yield for S&P/ASX 200 Index (ASX: XJO) shares is 4% per annum.

If you only own ASX 200 stocks with 100% franking, then your average gross yield goes up to 5.7% per annum.

That's pretty comparable with many of the property markets showcased above, especially apartments.

But some ASX shares pay a lot more.

Let's take a look at the dividend yields on the top 10 ASX 200 stocks.