The property market looks certain to register another record year in 2006 but a mild deceleration in house price inflation is likely next year, according to Bank of Ireland.

In its latest quarterly review of the property market, the bank predicted that house prices would have risen by 14 per cent by the close of 2006, which would bring the average cost of a home to €400,000 nationally and €540,000 in Dublin.

However, house price inflation is expected to ease to just 3 per cent next year as a result of a deterioration in affordability due to higher interest rates.

Previous estimates that placed house price completions for the year at 85,000 to 90,000 are now too low, the bank said.

It predicts that house completions may now reach 100,000. This equates to approximately 24 completions per 1,000 people, far in excess of the EU average.

"Despite the growth in completions, it is true that the Irish housing stock per head is still below the EU average, implying a catch-up period might be expected, but few if any envisaged annual house completions of this magnitude," commented Dr Dan McLaughlin, the group chief economist at Bank of Ireland.

As well as a surge in the supply of houses, demand has also proved to be "extraordinarily robust" in 2006, according to the review, and was driven by strong employment growth and an increase in population.

Growth in mortgage lending is also expected to remain strong in 2007, based on predicted house completions of 85,000.