UPDATE 1-Spanish house sales drop 28 pct in October

Wed Jan 7, 2009 7:19pm IST

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MADRID Jan 7 (Reuters) - Spanish house sales plummeted 28 percent year on year in October, marking the eighth straight month of decline, and mortgage lending plunged 41 percent as banks lent less and house prices dropped.

The sales slump was sharper than a 27 percent fall in September, National Statistics Institute (INE) data showed, and showed no sign of easing as consumer confidence slumps after Spain entered its first recession in 15 years in the fourth quarter.

Spanish house sales have fallen over 25 percent almost every month since INE started publishing the data at the start of 2008.

Starved of financing and saddled with a glut of unsold new homes, Spain's housing boom collapsed last year after house prices more than tripled in a decade.

Prices measured by the government began to fall in the second quarter and Wednesday's mortgage data showed they could be declining faster than recent official figures indicated.

The size of the average mortgage fell 10.4 percent to 135,202 euros in October versus 12 months earlier, INE said.

That compares with INE data from December that showed third quarter house prices fell 3 percent, based on advertised, not final prices.

Housing Minister Beatriz Corredor may have given a more accurate picture in November when she said house prices had already fallen 15 percent.

That would put Spain half way through a housing market correction based on estimates by Standard and Poor's of a 30 percent fall in nominal prices from their Q4 2007 peak.

The ratings agency said the downward trend may not reach a nadir before 2010 as Spain takes time to work through as many as 1.5 million unsold new homes.

It could take five years for supply to equal demand and building firms are going bust at a record rate. [ID:nLN475698].

Spain's Association of Surveyors on Monday said the price of new homes in Spain's 50 provincial capitals fell 6.6 percent last year.

INE mortgage data showed banks lent housebuyers 8.7 billion euros ($11.7 billion) in October, the same amount as in September and a fall of 40.7 percent year on year, maintaining a steep decline in the rate of lending seen since last spring.

(Reporting by Ben Harding; editing by Toby Chopra)

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