This was the third-largest biggest drop in the eurozone after Italy, where prices tumbled by a provisional 3.8%, and non-eurozone Romania, where prices slid by 2.3%.
Compared with the previous quarter, prices in Cyprus were flat, after a 1.5% quarter on quarter rise in Q2.
Prices for the EU as a whole jumped by 2.3%, thanks to increases in non-eurozone members, such as the UK, where prices rose by 11.7% and Sweden, where prices increase by 10.3%.
The highest annual increase was for Ireland, which saw a 15% increase.
Among the other high-fliers, Estonia rose by 13.2% and Latvia by 11.7%.
The Eurostat figure differs markedly from the Central Bank Residential Property Price index, which showed a drop of 8.8% year on year in the third quarter.