The average UK house price jumped by around £4,400 in September, pushing it to a new high of £267,587, according to an index.
Property values jumped by 1.7% month on month and by 7.4% on an annual basis, Halifax said.
The average price of a detached home has surged by £41,000 over the past year as buyers have searched for more space, the research found.
Russell Galley, managing director of Halifax, said growth in September was the strongest since February 2007, pushing year-on-year house price inflation up to 7.4%.
He added: “This also reversed the recent three-month downward trend in annual growth, which had peaked at an annual rate of 9.6% in May. The price of an average house is now as expensive as it has ever been, standing at just over £267,500.”
A stamp duty holiday in England and Northern Ireland ended in October, after being tapered from July, which may have played some part in the figures, Mr Galley said.
But he added: “It’s important to remember that most mortgages agreed in September would not have completed before the tax break expired.
“This shows that multiple factors have played a significant role in house price developments during the pandemic.
“The ‘race for space’ as people changed their preferences and lifestyle choices undoubtedly had a major impact.
“Looking at price changes over the past year, prices for flats are up just 6.1%, compared to 8.9% for semi-detached properties and 8.8% for detached.
“This translates into cash increases for detached properties of nearly £41,000 compared to just £6,640 for flats.
“Against a backdrop of rising pressures on the cost of living and impending increases in taxes, demand might be expected to soften in the months ahead, with some industry measures already indicating lower levels of buyer activity.
“Nevertheless, low borrowing costs and improving labour market prospects for those already in employment are likely to continue to provide support.”
A limited supply of properties, with estate agents reporting a further reduction in the number of houses for sale, is likely to underpin average prices into next year, Mr Galley said.
Jason Tebb, chief executive of OnTheMarket.com, said: “With latest data from the Halifax suggesting that house prices are now rising as fast last month as they did in the housing boom of 2007, the momentum we’ve seen in the market since the beginning of the year appears to be continuing apace.
“This is of course great news for vendors; however, it will probably stretch affordability for many buyers.”
Martin Beck, senior economic adviser to the EY Item Club, said: “Headwinds to further house price growth are increasing. Households’ spending power faces both a rising cost of living and the increase in personal taxation due next April.
“The weaker outlook for incomes means housing affordability, on measures such as the ratio of prices to incomes, will look ever more stretched.”
Mike Scott, chief analyst at estate agency Yopa, said he expects the current strong rate of price growth “to be maintained into at least the first half of 2022”.
Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “Developers can’t build quickly enough to sell into the strong market – particularly for family housing with outdoor space. There are some tentative signs that sourcing building materials is becoming more straightforward, but lead times can still be very long.
“Labour availability and wage inflation is now also on the sector’s radar.”
Tom Bill, head of UK residential research at Knight Frank, said: “A vicious cycle of low supply is putting upwards pressure on house prices as we enter the final quarter of the year, with some prospective sellers holding off because they are unable to find anywhere to buy themselves.”
He added: “We expect the supply squeeze to gradually improve over the next six months and downwards pressure on prices will therefore increase, a trend reinforced by the end of the stamp duty holiday and wider inflationary pressures in the economy. We expect UK price growth will end the year in the mid-single digits.”
John Eastgate, managing director of property finance at Shawbrook Bank, said: “There may be economic bumps in the road at present, but the long-term prognosis remains strong.”
Miles Robinson, head of mortgages at online broker Trussle said: “With such little housing stock across the country, it is very likely that momentum will continue.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With September’s house prices showing the strongest rate of growth since February 2007, clearly there is still some way to go before the market runs out of steam.
“While this is not great news for first-time buyers in particular, as well as second steppers struggling with affordability, mortgage rates remain low.”
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: “We are finding activity has lost some oomph but there is still plenty of life left, supported by record low interest rates and supply, while though rising, is not doing so fast enough.
“The market also seems to be shrugging off rising inflation and the end of furlough, as well as widening economic concerns.”
Karen Noye, mortgage expert at Quilter, said: “Flat prices continue to lag behind other housing stock pointing to people looking for more space as they adjust to new working practices and the ability to work remotely following the pandemic.”
She added: “While there continues to be a big demand and a dearth of stock prices may remain high.”
Martijn van der Heijden, from mortgage broker Habito, said: “One reason house prices remain inflated is the cheap cost of borrowing, with mortgages available with an interest rate less than 1%. This could change soon though, as the Bank of England faces more pressure to raise the base rate and get a firmer grip on increasing inflation.”
Here are average house prices across the UK and the annual increase, according to Halifax:
– Eastern England, £310,664, 7.2%
– East Midlands, £219,631, 8.0%
– London, £510,515, 1.0%
– North East, £155,683, 8.0%
– North West, £201,927, 9.0%
– Northern Ireland, £166,299, 9.3%
– Scotland, 188,525, 8.3%
– South East, £360,795, 7.0%
– South West, £276,226, 9.7%
– Wales, £194,286, 11.5%
– West Midlands, £225,404, 7.2%
– Yorkshire and the Humber, £186,815, 8.9%