The global economy is in the midst of sweeping realignments that have a significant bearing on all asset prices. The sudden and widespread surge in consumer prices after decades of low and stable inflation has forced central banks to tighten monetary policy even against the rising risk of recession. Higher interest rates and greater uncertainty have raised the cost of capital and put downward pressure on elevated asset prices, including the most important of all—housing. Since the global financial crisis (GFC) in 2008, housing prices have experienced an uninterrupted boom across the world, increasing as much as 50 percent in the case of emerging market economies in Europe. Figure 1 illustrates the major upswing in real house prices across the region, albeit at varying magnitudes. There is empirical evidence pointing towards a strong relationship between macroeconomic fundamentals and the housing market (Goodhart and Hofmann, 2008; Holly, Pesaran, and Yamagata, 2010; Davis and Zhu, 2011; Duca, Muellbauer, and Murphy, 2021). The reversal of exceptionally easy financing conditions is therefore a clear threat to house prices. But the property sector also plays a critical role in the economy, with potential spillovers from housing market risks to economic and financial developments (Mian, Rao, and Sufi, 2013; Kohlscheen, Mehrotra, and Mihaljek, 2020). Therefore, in the light of downside risks to the global economy and financial markets, it is crucially important to understand the main determinants of residential property prices and potential impact of a slowdown in income growth and a sustained increase in interest rates.