Average house prices in the UK hit a record £254,822 in December, according to lender Nationwide.
The typical house is now worth £23,902 more than it was in January, making it the strongest year for price rises since 2006.
But Nationwide predicted the market would slow next year because the stamp duty holiday, which ended in September, saw buyers bring purchases forward.
And it warned that slowdown could be made worse by the spread of Omicron.
"The Omicron variant could reinforce the slowdown if it leads to a weaker labour market," Nationwide's chief economist Robert Gardner said.
Interest rate rises
He said that even if the economy remains strong, higher interest rates were likely have a "cooling influence" on the housing market.
It suggests the lender may be expecting further increases to interest rates in the new year. Earlier this month, the Bank of England raised rates to 0.25% from their historic lows of 0.1% in a bid to tackle rising inflation.
Further increases in the cost of borrowing would mean fewer people are able to gain a foothold on the property ladder.
"House price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck," Mr Gardner said.
Wales saw the highest growth with prices increasing 15.8% compared to the same time last year. Meanwhile, price increases in London slowed compared to last year, climbing just 4.2%.
Speaking to the BBC's Today programme, Andrew Harvey, a senior economist at Nationwide, said the pandemic had caused a change in the behaviour of buyers who had been looking to leave large cities in favour or suburban and rural areas.
"I think London probably has suffered as a result of that," he said.
How did average prices change across the UK?
- Wales: Up 15.8% to £196,759
- Northern Ireland: Up 12.1% to £167,479
- South West: Up 11.5% to £294,845
- Outer South East: Up 11.3% to £329,869
- North West: Up 11.2% to £196,806
- Yorkshire and Humberside: Up 10.8% to £190,855
- East Anglia: Up 10.4% to £268,146
- East Midlands: Up 10.4% to £221,813
- Scotland: Up 10.1% to £172,605
- West Midlands: Up 9.4% to £227,031
- Outer metropolitan area of London: Up 8.8% to £410,992
- North: Up 7.7% to £148,105
- London: Up 4.2% to £507,230
Mr Gardner said it was the first time since 1973, when Nationwide began publishing house price data, that the largest price rises had been seen in Wales.
"Price growth remained elevated in Northern Ireland at 12.1%, the strongest end to the year for the region since 2007," he said.
"Annual house price growth in Scotland was 10.1%, in line with the wider UK."
Prospective property buyers have returned to cities, with flats the most highly in demand during the autumn, according to property portal Rightmove.
The UK housing market was relatively immune to the economic effects of Covid, with demand and price rises remaining high throughout the crisis.
This was driven by the race for space, with buyers attracted by larger, coastal or rural properties.
But as workers returned to offices, interest in apartments revived.
However, this is not a return to the pre-pandemic property market. Rightmove says there has been a long-term shift with buyers willing to pay more for space and privacy.
That means the gap in asking prices between detached and semi-detached homes has been stretched. In October, the typical asking price for a detached house was 76% higher than a semi-detached, compared with 70% in March 2020.
Prospective buyers have also widened their searches by an average of 50 sq km, perhaps willing to move slightly further away from transport links and High Streets as they spend more time working and entertaining themselves at home.
View with the room
"The pandemic redefined the role of the home and placed new emphasis on its importance, and people looked for more room in order to work, exercise, and often teach under one roof," said Tim Bannister, who works in property data at Rightmove.
"While we know from our data that people really care about people and their local community, the pandemic also made us more conscious of our personal space."