Spanish slump to halve property sector - Afirma

* Afirma sees no recovery before 2011

* Reyal Urbis talks to creditors to change debt terms

* Afirma will have to table new debt talks with creditors

* Spanish mortgage lending falls 37.4 pct yr/yr in March

By Andres Gonzalez

MADRID, May 26 (Reuters) - Spain's property slump will wipe out at least halve the sector and drag out until 2011, one of its biggest developers, Afirma, said on Tuesday, adding that it would have to renegotiate debts due to worsening trade.

Felix Abanades, chairman of residential developer Afirma (AFRA.MC) said that in the face off such harsh market conditions, Afirma was forced to table new talks with creditors, 11 months after agreeing new financing terms. Minutes later rival Reyal Urbis (REYU.MC) said it was already talking with creditors over changes to its business plan which would mean changing debt payments.

Abanades told industry conference SIMA that for the next two years real estate firms would continue to lose money, see the value of their assets fall and remain unable to pay down debts.

"In the short term, in 2009 and 2010, at least 50 percent of the companies in the sector will be lost and for the rest of us, there will be a shutdown in activity," Abanades told the auditorium which was barely a quarter full.

Government figures show that housing exchanges fell by 34.2 percent in the first three months of the year, while mortgage lending slumped 46.2 percent in the same period.

Abanades said that as a result mergers would become more common in a struggle to save costs.

Afirma was formed by the merger of several firms including Astroc, whose financial troubles in 2007 triggered a sell-off in real estate, construction and banking shares as the unsustainable nature of Spain's property boom began to be fully understood.

AFIRMA SEEKS DEBT TALKS

Abanades said later that conditions had deteriorated to such an extent since it renegotiated its 1.44 billion euro debt in June last year that it would have to table talks with creditors to hammer out a new agreement.