An investment case for putting all your property eggs in one basket

It is generally an accepted investment principal that diversification can reduce your risk and improve investment returns. The common vernacular is, spread your eggs amongst various baskets. I would agree with this principle, so long as it doesn't result in deterioration of investment asset quality.
Sometimes property investors should not diversify. That's because the quality of your investments, will determine your future investment returns. You cannot expect to invest in average quality assets and expect to generate above average quality returns. If you're going to invest in property, you are much better off to buy one very high-quality property, than two average quality properties.
To be a successful investor, you must invest in the highest quality property that your budget allows.It is also imperative to recognise that the dollar value appreciation of your property is an important metric which indicates whether you will enjoy a comfortable retirement.
In retirement, we pay for living expenses in dollars, not percentagesThe value appreciation of property in dollar terms is an important metric. Whilst we can’t use capital growth to pay for living expenses, unless we sell the property, it still impacts our overall wealth. For example, if a retiree had $1,000,000 of super and wanted to spend $100,000 per year, they risk running out of super within 10 years (ignoring future investment earnings for simplicity). However, if at the same time, their property portfolio was appreciating by $200,000 per year, they are actually in a relatively strong financial position.
In 1991, 30 years ago, the median house price appreciated by around $10,000 per year – which is equivalent to $20,000 in today’s dollars (i.e., after adjusting for inflation). Since the average self-funded retiree spends circa $100,000 per year, this property appreciation ($20,000) is equivalent to 2.5 months of living expenses.
At the moment, the average median house price across Melbourne and Sydney is around $1,000,000. Assuming the median property appreciates by approximately 6% per annum (on average, over the long run), that equates to a dollar value rise of $60,000 (i.e., 6% of $1 million). That is equivalent to over 7 months of living expenses.
Annual property price appreciation in real dollar terms over the past 30 yearsThe chart below illustrates the historic change in median prope

ASK ME A QUESTION ON YOUTUBE: https://www.youtube.com/watch?v=ACnxmEP8vv8

My YouTube channel: https://youtube.com/@investopolypodcast

If this episode resonated with you, please leave a rating on your favourite podcast platform. It helps me reach more incredible listeners like you. Thank you for being a part of this journey! :-)

Click here to subscribe to Stuart's weekly email.

SPECIAL OFFER: Buy a one of Stuart's books for ONLY $20 including delivery. Use the discount code blog here.

Work with Stuart's team: At ProSolution Private Clients we encourage clients to adopt a holistic and evidence-based approach when making financial decisions. Visit our website.

IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.