It added that the annual rate of house price inflation was likely to rise during the early part of 2006, to peak at about 7 per cent or 8 per cent in the middle of the year, as modest price rises compared with slight falls during the same months of 2005.
of this year.
The group said it expected earnings growth to outstrip house price rises during 2006, with the average salary rising by 4.5 per cent.
This will help the house price-to-earnings ratio ease back from a peak of 5.6 in mid 2004 to 5.4 by the end of next year, making it
slightly easier for first-time buyers to get on to the property ladder.
Halifax chief economist Martin Ellis said: 'The UK housing market is set for a period of broad stability, with house prices forecast to rise by 3 per cent, broadly in line with the predicted rise in retail price inflation.
'Low, single digit, growth is expected to be the norm across most of the country.
'Continuing economic growth, the high level of employment, robust earnings increases and the prospect of further interest rate cuts will support housing demand during the coming year.'
But he added that the group was not expecting a renewed surge in house price growth as the historically high level of house prices relative to earnings would curb demand, while rises in both council tax and utility bills would increase the total cost of running a home and offset lower mortgage rates.
On a regional basis, house price growth looks set to slow most in Wales Scotland and Northern Ireland, where it is still in double
In Northern Ireland Halifax expects it to slow from 16 per cent during 2005 to just 5 per cent, while in Wales it will ease from 14% to 3 per cent and in Scotland it will drop from 10 per cent to 7 per cent.
Price gains will remain subdued in the South, with no change predicted for East Anglia, while in the South West prices will edge ahead by just 1 per cent and they will rise by only 2 per cent in the South East.
Halifax said this would help to further narrow the north/south price divide, predicting the average property in the South would cost 1.5 time more than one in the north by the end of 2006, compared with 1.6 times more now.