Traditional studies of real estate finance have focused on observable, officially recorded variables such as credit expansion and liquidity conditions. This paper explores, for the first time, the hidden role of the shadow economy by employing an annual panel dataset of housing prices across 40 countries over the period 1991-2017. We find that growth in the shadow economy is positively and significantly associated with growth in real house prices. The result is robust to dynamic panel estimation using the Arellano-Bond and system GMM estimators. The effect is around five times larger in developing than in advanced countries, and a leave-one-country-out exercise confirms it is not driven by any single country. Quantile regressions show that the effect is present across the conditional distribution of house price growth and is stronger at the lower tail. By contrast, the shadow economy is not a significant predictor of the probability of entering a housing boom once persistence and cross-sectional dependence are controlled for. Our findings suggest that financial stability policies targeting real estate markets should explicitly account for the influence of informal economic activity.