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Half Life 3 Won’t be a Source Engine 2 Game

Source
It seems Valve will be making significant improvements to its current Source Engine rather than going all out for the new game engine.

Studio boss Gabe Newell told Develop:

There are lot of advantages on iterating on a mature and stable and shipped codebase, as opposed to starting over again.

I think, when you see a game like DOTA 2, you’ll see how developers can get a lot more out of Source than most companies can get from a scratch-built engine.

DOTA 2 is Valve is recent project which indicate they are not going to change their engine update policy for any game that has been in development or would be developed for next few years.

Considering the fact that next installment in Half Life series is in development, it wouldn’t be given a new engine treatment regardless of the popularity and anticipation of the game.