The price of a typical UK home climbed to a record high of £265,312 in March, according to an index.
The average price has increased by more than £33,000 in the past year, Nationwide Building Society said.
In March 2021, the average UK house price was £232,134.
Property values grew by 14.3 per cent annually – the strongest pace of increase since 2004. Prices are now a fifth higher than before the outbreak of the pandemic in 2020.
Nationwide said it was becoming harder for homeowners to trade up, with price gaps between different property types moving to a record high.
“March saw a further acceleration in annual house price growth to 14.3 per cent, the strongest pace of increase since November 2004," Robert Gardner, Nationwide’s chief economist, said.
“Prices rose by 1.1 per cent month on month, after taking account of seasonal effects, the eighth consecutive monthly increase.
“The price of a typical UK home climbed to a new record high of £265,312, with prices increasing by over £33,000 in the past year. Prices are now 21 per cent higher than before the pandemic struck in early 2020.
“The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs.
“The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10 per cent above pre-pandemic levels. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.
“The continued buoyancy of housing demand may in part be explained by strong labour market conditions. The unemployment rate has continued to trend down in recent months from already low levels. Wage growth has accelerated, though it is running below inflation.
“The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit. We estimate that households accrued an extra (around) £190 billion of deposits over and above the pre-pandemic trend since early 2020, due to the impact of Covid on spending patterns.
“This is equivalent to around £6,500 per household, although it is important to note that these savings were not evenly spread, with older, wealthier households accruing more of the increase.
“Nevertheless, we still think that the housing market is likely to slow in the quarters ahead."
Nationwide said the average value of a detached home has increased by £68,000 since early 2020, while the average price of a flat has increased by £24,000.
Alex Lyle, director of estate agency Antony Roberts, said: “Prices continue to rise in the family house market in particular, with large numbers of viewings, multiple offers and sealed bid scenarios all common. Ambitious or inflated pricing of flats means they can easily get stuck.”
Tom Bill, head of UK residential research at Knight Frank, said: “Despite the exceptionally strong growth seen over the last year, a housing market slowdown is in the post.
“The cost-of-living squeeze and rising mortgage rates will undoubtedly take their toll on demand later this year. As we move beyond Covid and supply builds, this will also mean that house price growth becomes less eyebrow-raising.”
Mike Scott, chief analyst at estate agency Yopa, said the housing market could not ignore the wider economy forever. "We expect a slowdown in the second half of the year, but no significant falls in prices.”
House prices across the UK
– Wales, £201,502, 15.3 per cent
– South West, £300,936, 14.4 per cent
– East Anglia, £277,332, 14.2 per cent
– Yorkshire and the Humber, £199,235, 13.5 per cent
– East Midlands, £227,275, 13.5 per cent
– Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £337,094, 12.8 per cent
– North West, £204,511, 12.4 per cent
– Scotland, £178,289, 12.0 per cent
– West Midlands, £233,136, 11.7 per cent
– Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £422,428, 11.4 per cent
– Northern Ireland, £171,095, 11.1 per cent
– North East, £153,029, 10.6 per cent
– London, £518,333, 7.4 per cent