HBOS has predicted that the UK housing market will remain flat in 2006.

HBOS has predicted that the UK housing market will remain flat in 2006.

The company's latest forecast claims that prices will generally go up by three per cent, in line with the predicted rise in retail inflation.

House price inflation is expected to rise significantly in the early part of the year, before easing in the latter part of 2006.

Continuing economic growth and a high level of employment, which has hit a record 28.81 million during the past year, are expected to fuel a good demand for housing.

However, steeply rising council tax and utility bills are expected to keep growth within modest levels.

HBOS said that 2005 house prices had risen by less than the long-term average of eight per cent a year for the first time since 2000.

The company forecasts that earnings growth in 2006 will outstrip house price growth, at 4.5 per cent, making it slightly easier for first-time buyers to get on the housing ladder.