UPDATE 1-Tokyo area new condo supply down for 21st month

* New apartments put up for sale in Tokyo total 3,538 in May

* New units up for sale drops for 21st straight month

* Contract ratio improves by 6 pct points to 70.7 pct

TOKYO, June 16 (Reuters) - The number of new apartments put up for sale in the Tokyo area fell 19.4 percent in May from a year earlier, dropping for the 21st straight month, a property market research firm said on Tuesday.

The data underscores the weak state of the property market in Japan, which is mired in its worst recession since World War Two.

New units put up for sale in the Tokyo area totalled 3,538 in May, the Real Estate Economic Institute said.

However, the contract ratio in the Tokyo metropolitan area rose to 70.7 percent from 64.7 percent in April.

The ratio, the number of units sold as a percentage of units put on the market, is used to judge the market's health and a ratio below 70 suggests a weak market where consumers are reluctant to buy.

The number of unsold apartments in the greater Tokyo area came to in 8,333 in May, down 5 percent from April and staying below the closely watched 10,000 level for the fourth straight month.

Japan's $46 billion apartment market has been hit hard by the economic downturn and global credit crunch, which triggered dozens of failures among major property developers.

But property agents have reported a pick-up in interest from potential buyers thanks to lower prices and an expansion in tax relief on housing loans. [ID:nT281240]

Japan's leading apartment sellers include Sumitomo Realty & Development Co (8830.T), Mitsui Fudosan Co (8801.T), Daiwa House Industry Co (1925.T) and Daikyo Inc (8840.T). (Reporting by Mariko Katsumura; Editing by Chris Gallagher)