The bottom line is that it has more to do with the fundamentals of the transactions and the interactions with people than anything. Real estate can be a great investment in good times and in bad simply because it can (or should) produce positive cash flow for the investor. Yes, equity is important but cash (flow) is king.
Real estate hasn't really hit bottom yet in regards to prices but I hear that demand is increasing, at least on some level, and will continue, albeit at a snails pace, over the next 12 to 18 months. But demand alone DOES NOT justify a price increase which might otherwise be ok in another time or place. This time things are different. The shadow inventory alone (some say there's 10,000 units sitting unsold in Prague alone) will continue to stifle prices for probably another two years.
In spite of the so called recovery of the broader economy, high unemployment and continued financial market jitters mean mortgage lenders will remain guarded in their lending practices. Monetary policy, however, does remain supportive and the historically low mortgage rates have boosted home affordability, providing some price stability across parts of Europe. In Western Europe, for example, prices have risen by about 2% on average since this time last year and there is a very mixed picture at the individual country level, reflecting the diverging path of economic recovery. Property values continue to fall, however, in Ireland, Greece, Spain and the Baltics, where the economic difficulties continue. The Nordic markets and the UK appear to be the strongest markets, price-wise, while prices are stabilizing in larger markets such as Germany and France. But through it all it appears that the so called pricing correction that many claim happened during the crisis fell short of balancing investment price-to-income ratios. This may imply that there are still downside risks to today’s pricing levels.
