There are many good reasons that support higher prices, such as demographic changes, as smaller families require more overall living space, expectations that real and nominal interest rates will remain low, and regulatory restrictions that curtail land supply. Surely, the ample liquidity that has been pumped into the markets in recent years has created conditions conducive to speculative excesses.
Most countries in the euro area have not yet had any experience of significant correction in nominal housing prices. It is possible that both borrowers and creditors have underestimated this possibility and in some cases both credit expansion and housing prices increases look questionable. Developments in Greece are a good illustration of the forces that operate throughout Europe.