Abstract
<jats:p>This paper studies the long-run dynamics of real house prices in Greece and their structural drivers. We develop a Bayesian VAR model with time-varying unconditional means that allows to decompose real house prices into a slow-moving structural trend and a transitory cyclical component. The proposed empirical framework accounts for structural changes in the housing market and episodes of heightened macroeconomic volatility. Applied to Greece over 2002-2025, it identifies a pronounced and persistent upward shift in the long run house price trend from 2017 onward. Historical decomposition of the structural shocks attributes this shift mainly to self-reinforcing house price dynamics, but also to the joint effect of strong demand and constrained supply in the housing market. Allowing for time variation in the long run equilibrium of house prices yields a more appropriate assessment of potential housing market imbalances compared with a constant steady state benchmark.</jats:p>