In Spain, a country about to undergo economic armageddon, house prices are down 22% from the peak in 2007. That is a ridiculously small amount. That would imply that prices in were at most 22% overvalued, and that no economic deterioration has taken place since then. Or that the economy has deteriorated enough to justify a 22% price fall, but that prices in 2007 weren't at all overvalued given the economic conditions of the time. Whereas obviously prices were much more than 22% overvalued in 2007, and the economic situation has deteriorated massively since then. So prices should be at least 40-50% off the peaks. Right now, banks have been repossessing and now own properties en masse. Given the situation in the PIGS countries, they simply cannot afford to have these assets tied up on their balance sheets. They will need to liquidate at any price to shore up their reserves. Obviously, there are far less buyers today than in a normal year for real estate. And if PIGS turmoil and spending cuts increases, which it obviously will, then demand will become even lower. Combine a huge increase in immediate price-insensitive supply from the banks, and a significant fall in demand from already anemic levels, and add in a ridiculously overvalued price anyway, and there is only one way that prices can go - down, down, and deeper down. Investor demand from professional landlords and bottom fishers will not enter in a serious way until you can buy a property for 10 times or less annual rental income. And rents may also fall due to economic malaise. This story is repeated across Europe - in Ireland, Greece, Italy, UK, Eastern Europe. Only Germany and Austria really have real estate at reasonable valuations, and they also have fairly robust economies right now (in relative terms at least). So, IMO the real estate market in the EU is going to get absolutely clobbered. It is mind-boggling to me that anyone would want to buy at current prices with the current fundamental outlook - but then that was true in 2007 too and it didn't stop people doing incredibly dumb things. One thing you learn in this business is that people just make dumb decisions en masse, and it goes on for years. All of this suggests that the EU is a giant short. Short the real estate stocks, the bank stocks, the Euro, the pound, and the government bonds in the PIGS. Only exporters and mining stocks will really benefit. This also means that the dollar is probably a huge buy, which almost no one believes right now. What it means for gold, I'm not sure - the forthcoming EU panic could cause capital flight into gold as a safe haven, or the dollar could strengthen and thus weaken gold somewhat. So I suspect gold might just trade in a wide and choppy range as the bulls & bears fight over these two competing themes. Probably best just to buy the dips, sell the rips, and accumulate a long-term position by dollar cost averaging for when gold makes its eventual big rally to $2000.