Nov. 10 (Bloomberg) -- New Zealand house prices fell at the fastest pace in more than three years in October as an economic recession and a deepening global financial crisis deterred buyers.

Average prices dropped 6.8 percent from a year earlier, Quotable Value New Zealand Ltd., the Wellington-based government valuation agency, said in an e-mailed report today. It was the biggest decline since the series began in February 2005.

Falling property prices adds to signs the economy's slump is worsening and reinforces expectations the central bank will reduce interest rates for a fourth time this year when policy makers meet next month. Reserve Bank Governor Alan Bollard will cut the official cash rate by at least half a percentage point on Dec. 4, according to 11 economists surveyed by Bloomberg News.

``There appears to be uncertainty in the market, with many buyers and sellers waiting to see any impact from the financial crisis and dropping interest rates before committing to transactions,'' said Blue Hancock, a spokesman for the valuation agency.

New Zealand's benchmark stock index slumped last week to the lowest since July 2004 and the currency has tumbled 24 percent against the U.S. dollar this year.

Bollard lowered his benchmark lending rate by 1 percentage point to 6.5 percent last month to try to revive an economy that shrank in the first two quarters of 2008, its first recession in 10 years. The Reserve Bank forecasts the economy also contracted in the third quarter.

Home prices in Auckland slumped 7.7 percent and in Wellington by 6.1 percent, today's report showed. Price across the nation's 17 main urban centers dropped an average 7.5 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

Last Updated: November 9, 2008 06:01 EST