For investments it's generally to do with 1) the risk of holding the asset, 2) the potential return on the capital invested, and 3) the difference on returns be

For investments it's generally to do with 1) the risk of holding the asset, 2) the potential return on the capital invested, and 3) the difference on returns between asset classes. Two examples: I can invest $1m into one or multiple properties. Depending on the location, I will get some yield on that capital invested -- e.g. 5% per year from capital appreciation + rent. There are other locations where the return might be less than 5%, or more than 5%. But there are generally are reasons for that (the yield of investing in property in NYC will be lower than if you invested in say, Kiev Ukraine). It's risk reward. Tax policies, for example, might incentivise local owners (who actually live in the property) to buy property where it is unrealistic for an investor to make money on -- if yields are 1 or 2%, one could say it's overvalued (unless we are talking about unique buildings in prime locations that are unlikely to ever decline in value). Now a different situation: assume the stock market has declined by 40%, but property prices have not. One could say property is overvalued then (i.e. not the best asset to invest money in). As the spread between valuations and yields between different assets increases, some assets could be overvalued when comparing them to others.