House prices could be rising at the rate of 8 per cent a year by the middle of 2021, economic consultancy Infometrics has forecast.

It believes the Reserve Bank will remove some chocks on the housing market by further watering down loan-to-value restrictions, when it publishes its next Financial Stability Report next month.

Infometrics also forecast the Government would announce new spending initiatives in December, in the wake of the $7.5 billion annual surplus the Treasury revealed last week "to respond to increasing calls for more fiscal stimulus".

New Zealand had been served up "a potent cocktail" of slowing population growth, peaking construction activity, weak business confidence, a lack of capital investment spending and poor labour productivity, Infometrics chief forecaster Gareth Kiernan said.

Next year, growth in the global economy could slow to its lowest level since 2012 because of the United States' trade war with China.

That would be a drag on the New Zealand economy which it expects to grow by between 2 per cent and 2.5 per cent annually over the next two years.

But Infometrics forecast a move by the Reserve Bank to cut the official cash rate (OCR) to 0.5 per cent "and possibly lower" would help the housing market.

"There are signs that lower mortgage rates are having a small positive effect on the housing market.

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"But Infometrics expects a more pivotal move by the bank will be another reduction in its loan-to-value restrictions at November's Financial Stability Report," Infometrics said in a report published on Friday.

"House price inflation could rebound to 8 per cent per year by mid-2021 given easier lending conditions and the lingering undersupply of housing in Auckland," Kiernan said.

But he said any rebound would be "temporary", and prices were likely to come under renewed downward pressure as high levels of residential construction ate into the housing shortage.

Westpac is also tipping house prices to accelerate. It said on Tuesday that it expected prices could rise by 7 per cent next year.

The Reserve Bank has been keen on new powers to restrict the amount of money home buyers can borrow relative to their income, but has indicated that if it had those powers now it would probably hold them in reserve.

The Reserve Bank said in August that a third of first-home buyers taking out mortgages in June had borrowings that exceeded five times their pre-tax annual income – the level at which the Reserve Bank can start to feel uncomfortable.

In Auckland, the figure was almost one in two.

But those figures were better than two years ago, and even if the Reserve Bank (RBNZ) had the tools to intervene, right now it probably wouldn't on the basis of those numbers, financial system policy head Toby Fiennes said then.

"We see the vulnerabilities in the housing market as having reduced over the last two or three years and that is why we have been reducing loan-to-value (LVR) restrictions," he also said.