In times of crisis, people have a tendency to retreat to the comfort and safety of their homes until they feel confident that they can handle the upheaval outside. Investors are people, too, so when the capital markets froze and real estate values started crashing to the ground, cross-border investing, which had been growing rapidly during real estate’s heydays, contracted sharply, falling about 60 percent from its peak.

"The credit crunch and the recession created a completely new investment environment,” says Timothy Horrocks, head of Germany property/European property distribution at Henderson Global Investors. “There is a high level of uncertainty and investors worry about ‘unknown unknowns’. As a result, investors stick to their domestic market, the one they know best and the one in which they feel safe and able to deal with any u