Harcourts, the country's largest real estate agency, said last month's house sales were extremely disappointing and the lack of deals confounds logic.
Bryan Thomson, Harcourts' chief executive, said September was usually a busy month but the "fear factor" was stalking the sector.
"In lots of ways, the currentsituation confounds good logic especially when it comes to buyers in the residential property sector," he said.
Most New Zealanders buy a house as a place to live and those places are getting cheaper, he said, as interest rates fall, taxes are cut and house prices ease.
"Logic suggests house buyers should be active. Those sellers who are looking to trade up too would be expected to seize the day," he said.
Harcourt's figures told a grim story.
Written sales in the northern region, which includes Auckland, fell 35 per cent from 402 deals last September to 262 deals last month. The amount of unsold real estate in the region ballooned 93 per cent from 1750 properties last September to 3376 properties last month.
The number of people choosing to sell only via Harcourts fell 16 per cent from 505 exclusive listings last September to 423 last month. Average prices are up 4 per cent from $487,000 last September to $505,000 last month.
"September is normally the month we see a lift in activity, both in terms of the volume of new listings coming to the market and the number of sales being concluded," Thomson said.
"This September was much anticipated by our industry and for the first three weeks results were closely aligned with expectations, but the flareup in global financial markets appears to have reactivated the fear factor with activity slowing again. So, overall the month finished off ahead of August but well below September last year," he said.
Written sales last month fell 14 per cent in the North Island central area, 11 per cent in Wellington, 12 per cent in Christchurch and 15 per cent for the South Island provincial area.
Real Estate Institute figures due out early next month will give a national picture of the sector.
