That depends on the size of your other investments. If the property is worth $100,000 and your total assets are $1,000,000 with the rest in stocks, that one property is a reasonable level of diversification. If you already have a house worth $500,000 then taking money out of stocks to buy the rental is a bad investment. The above are but two very simplified examples. You need to figure out what is correct for your situation though - there is no one size fits all.

It is a single investment that is government-subsidized with loan-interest subsidies, that you can live in, that also people tend to have great emotional attachment to an unhealthy extent.

Home loans at least in the United States taken out at usually 5x leverage which would never fly for index funds but is ok for some reason for buying a home, even though you could become unable to pay the mortgage in which case the bank has to spend money foreclosing and selling it.

>The problem that happens is most asset classes become correlated in a downturn.

I tend to think it's not worth it to try to hedge against that unless know you're going to need hard cash for a specific purpose during a recession, like meeting payroll in your own company.

My ide of diversifying is to hedge against industry-specific risks like space launches if Kessler syndrom hits, internal combustion tech if the ICE car ban becomes reality, real estate if the Detroit scenario happens, etc.