The property market is set to stabilise next year, Hometrack has forecast.

According to the property market research company, prices will fall another three per cent during the first half the year, but then strengthen once again during the following months, with prices finishing 2005 at around the same level as the start of the year.

Market activity will be down, as will numbers of buyers, Hometrack said, with transactions forecast to fall from 1.75million in 2004 to 1.6million next year. However, ?normal? activity will resume in 2006, when Hometrack predicts there will be 1.7million transactions.

Hometrack?s confidence in the market, according to chief economist John Wriglesworth, is based on the strength of the economy, with rising household incomes and falling unemployment, as well as mortgage lenders? increasing willingness to lend larger amounts to individuals.

?2004 has been a rollercoaster year for house prices. The first six months saw continued price rises before the market turned in July. By November, Hometrack had reported a 0.6% decrease in house prices, the fifth consecutive monthly fall of the year,? said Mr Wriglesworth.

He added: ?[2005] will be a year of two halves; as the market stabilises we should see a stronger performance in the last six months, meaning that house prices should finish the year in the same shape they started it.?