It was the biggest fall since Quotable Value New Zealand Ltd, the Wellington- based government valuation agency, began recording figures in 2005.
Declining interest rates would normally stimulate buyer activity, but concerns over job security, and a more cautious approach to lending by financial institutions seems to be preventing this according to QV spokesman Blue Hancock.
'Many buyers also appear to be holding back in expectation of further property value and interest rates drops throughout 2009,' he said.
The slump is, however, opening up good buying opportunities as interest rates also fall and sellers drop their prices, he added. He said that although sales were lower this was typical for the summer holiday period and a positive sign in that more property investors are returning to the market.
Property price drops varied across the country. Auckland and Tauranga saw values slip by 9%, Hamilton and Whangarei by 10%, Rotorua by 11.9% and Gisborne by 10.6%. Wellington dropped 8.5%, Christchurch 8.8% and Dunedin 8.3%.
New Zealand's economy slumped into a recession in the first quarter last year and may not start growing until the second half of 2009, according to Alan Bollard, governor of the Central Bank.
The nation's unemployment rose to a five-year high of 4.6% in the fourth quarter of last year, according to government figures. Prime Minister John Key said last week he had encouraged bank chief executives to 'act honorably' and pass on lower costs to their customers.
