House prices surged to a record high last month as buyer demand rocketed after the extension of the stamp duty holiday.

The average price of a property in the UK rose 6.5pc in the year to March 2021, hitting £254,606 in March, according to Halifax.

It comes as analysis firm Capital Economics forecast house price inflation could go into double figures over the summer.

The market has been buoyed by Government measures intended to protect it against price drops, including the extension of a Covid stamp duty cut and taxpayer support for 5pc deposit mortgages. Between February and March, prices rose by 1.1pc - a much bigger rise than the consensus forecast of a fall of 0.1pc.

Unprecedented demand has driven up price growth, with widespread warnings of a supply shortage as buyers submit offers way in excess of the asking price to secure properties that have green space and are in sought-after country locations.

Earlier this week, estate agents polled by trade body the Royal Institution of Chartered Surveyors reported a surge in property sales in March following the stamp duty announcement in the Budget.

Russell Galley, of Halifax, said the market is likely to remain buoyant for months as vaccines bring life closer to normal.

He said: "A shortage of homes for sale will also support prices in the short term, as lower availability always favours sellers.

But Mr Galley added that this growth could eventually drop off when taxpayer support is withdrawn, as the biggest recession for 300 years makes its impact felt.

He said: "We remain cautious about the longer-term outlook. Given current levels of uncertainty and the potential for higher unemployment, we still expect house price growth to slow somewhat by the end of this year."

Rhys Schofield, of Peak Mortgages & Protection, said there is a bottleneck in the property market with large numbers of prospective buyers and not enough new stock.

He said: "The sheer volume of prospective buyers is partly due to the return of first-time buyers, as securing a higher loan-to-value mortgage has got a lot easier over the past month or two."

Buyer demand had been expected to collapse when the stamp duty holiday was initially set to end on March 31. Now the tax break has been extended in full until June 30, and will then taper away over the following three months.