A total 361'831 homes were sold in 2011, less than half 775'300 that were sold in 2007 shortly before a devastating property bubble collapse, said the National Statistics Institute.
The property market had shown signs of life in 2010 when sales climbed 6.8 percent after years of sharp declines. Spain emerged only at the start of 2010 from an 18-month recession triggered by a global financial crisis and the housing market crisis, which destroyed millions of jobs and left behind huge bad loans and debts.
After growing 0.7 percent last year, the economy is sliding back into recession.
Economy Minister Luis de Guindos has predicted that the first quarter of 2012 will be worse than the final quarter of 2011, when activity shrank 0.3 percent.
The outlook for Spain's housing market is still fragile, with an estimated stock of 1.5 million unsold new and old homes.
To kickstart the market, the government has told the banking sector to set aside 50 billion euros in provisions against losses on their property assets, hoping to drive down home prices.
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