The average home rose £2,500 in September to hit an average price of £167,063 as the market continues to gather momentum, according to latest Land Registry figures.
House prices across England and Wales rose 3.4% in the last year, a figure dwarfed by the 9.3% leap in London.
Prices are now rising across most of the country, although growth is slow in the North West at 0.6%. Wales was the only region to see a drop in prices, down 1.7%.
The number of completed house sales rose 17% to 69,140 in the year to September, compared with 59,141 in July 2012, the figures showed.
But transaction levels remain far lower than before the financial crisis, when they routinely topped 100,000 a year, calming fears of a bubble.
David Newnes, director of LSL Property Services, said the housing market is gathering momentum as prices rise steadily up and down the country. "With GDP also on the rise we seem to be making strong steps towards a recovery.
"More mortgages are being approved and waves of first-time buyers are returning to the market, meaning there’s certainly cause for renewed optimism and confidence.
“Help to Buy and more lending at higher LTVs have provided a vital boost and this is giving a helping hand for those who have been struggling to step up onto the property ladder.
"But this is still a tall order for those still trying to save for a deposit and the increases in demand must be matched with greater supply to maintain a healthy property market in the long term.”
Nick Tamplin, founder of online estate agents Zevizo Properties, said: "With the economy continuing to strengthen, and mortgage rates at unheard-of lows, people are finally starting to commit to a purchase. There is a lot of pent-up demand out there and that is translating into sales.
"There's a buzz in the market that hasn't been there since 2006."
Tamplin was optimistic about 2014 but warned that sellers should not get carried away. "Ask too much for your property and it will languish on the market. Buyers are paying more but, with the exception of London, aren’t barking mad."
Nicholas Ayre, managing director of homebuying agency Home Fusion, said: "What helps is cheap mortgage rates and the increasing willingness of lenders to lend. Now buyers are thinking that if they apply for a mortgage they are more likely to get it.
"Many buyers have delayed a move for years because of the dire economic situation but many have had enough of waiting and are ready to make a move, assuming they can find the right property."
But he suggested that pricing is accelerating away from affordability we may reach a point where buyers are once again struggling to get on the property ladder.
Jeremy Duncombe, director at Legal & General Mortgage Club, said: “Significant house price rises will continue to fuel speculation that prices are rising too quickly. However, it’s worth remembering where the market has come from.
"A year ago it was beset by lethargy so the impetus created by the various stimulus schemes should not be wished away too quickly.
"It is also worth remembering that Help to Buy is a temporary measure. If the Government needs to change its terms or withdraw it altogether to avoid the market overheating it can do so.
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