Spain housing prices fall 7.4 pct in long slump

MADRID Dec 15 (Reuters) - Spanish house prices dropped 7.4 percent in the third quarter from a year ago, the fourteenth straight quarter of falls, as the property market remained submerged in a prolonged slump that threatens to undermine banks' solvency.

In the July to September period prices fell 2.8 percent quarter-on-quarter, the national statistics institute INE said on Thursday.

Spanish banks lent heavily to a property bubble that burst at the beginning of 2008 when the global finacial crisis put an end to easy mortgage credits.

Now the incoming centre-right government is considering ring-fencing toxic real estate assets at state level in order to improve solvency and increase confidence in Spain's financial sector.

House prices have dropped around 24 percent in real terms since their peak in 2007 and are expected to decline between 35 and 40 percent over a 10-year period, with demand hit by high unemployment and low population growth. (Reporting By Tracy Rucinski)