This paper explores the impact of financial markets and institutional environment on residential property prices. In addition to the theoretical part, the paper includes an empirical part in which a panel analysis of dynamic models is assessed by the impact of selected variables on the house price index. Selected variables represent government efficiency, regulation and degree of development of financial markets, according to which two hypotheses have been formed. The estimator used in the panel dynamic model analysis is the Blundell-Bond estimator and was selected because of the consistency of its characteristics and research sample. Many countries face vulnerabilities related to real estate markets. Increasing demand pressures on real estate price growth are emerging, especially given the current period of historically low interest rates, so it is important to establish what are the determinants that affect residential property prices. The conclusion of this research is that the degree of development of financial markets does not affect the prices of residential real estate. Of all five estimators, only one showed statistical significance of this variable, but at a significance level of 10%. On the other hand, the results of selected estimator confirm that the institutional environment, more precisely government effectiveness, quality of regulation and rule of law, have a positive effect on residential real estate prices.