Since August 2014 average house prices have leapt from £182,108 to £209,272, according to data released this week by LSL Property Services.
Analysts have attributed the rise to the town's attraction to London commuters who are fleeing excessive rents and expensive properties.
The news comes as the town continues to battle a housing shortage which has seen Luton Borough Council fork out millions on temporary accommodation.
Richard Sexton, director of e.surv chartered surveyors, said the price rise was 'good news for home owners but not those waiting to get on the housing ladder'.
He said: "There are two particular factors which are relevant. One is what is going on in central London
"Prime prices have started to plateau but they are still expensive so people are looking to move out and I think Luton is benefiting from that.
"It has got good communications inks with London so it is viable.
"The other is that it used to be the case that nine out of ten repossessions were in the north and the other one was Luton, so if you have a lot of that it drags prices down. But that has decreased and coupled with the London effect, it raises prices."
Couple Matt West and Amanda Kelly and their seven-year-old son had to leave their home in Sundon Park after their landlord asked to have the property back.
Mr West said they have been unable to find another house and are currently staying at B&B in Dunstable which is also housing residents from Milton Keynes.
He said: "We got evicted on September 15 and now we are on the bidding system but we are 125 out of 130. And that's for a brand new house in Houghton Regis that's not been built yet."
Both the town's MPs, Gavin Shuker and Kelvin Hopkins, said they were concerned the government's starter homes announcement would 'exacerbate' the situation and reduce the number of available properties.