The figures from the National Statistics Institute data show that the fall in lending in March means that today it is only a third what it was at the height of the Spanish property boom in 2007.
The average value of mortgages fell 13.3 percent in March from a year ago, the National Statistics Institute said, providing another sign of falling prices in a housing market which saw values triple in a decade.
The figures are released at the same time as a report shows that there are currently over a million new residential properties on the market that have not been sold. The data from the Instituto de Práctica Empresarial, a Spanish business school that specialises in the real estate sector, put the figure at 1,050,000 and says that many of them are in just two regions.
Andalucia and Valencia, the most popular areas for foreign property investors currently have almost 40% of the new properties that are unsold, the IPE report says. There are 155,185 in the Valencian region alone.
If there is no recovery in the Spanish real estate market soon there could be over 1.2 million unsold newly built properties on the market by 2012, the report warns.
Economists say that Spain's property and construction industries reached unsustainable levels during the bonanza years, when building accounted for up to 18% of gross domestic product.
This was made possible by easy funding available on foreign bond markets for Spanish banks, which then passed on the money to house buyers in Spain. This finance has dried up, making banks much less ready to lend and undermining the cycle of ever-increasing property prices and investment which made Spain outperform other euro zone economies for years.
Spanish gross domestic product shrank 1.9% quarter-on-quarter in the first quarter of this year, the country's worst contraction in half a century, due to the twin shocks of the global crisis and a property collapse.
