Euro crisis hits confidence in UK property-Lloyds

* Negative sentiment spreads to London property market

* More European banks could stop lending in Q1 2012

LONDON Jan 6 (Reuters) - Confidence in the health of the UK property sector is suffering from the euro zone debt crisis and the unease is spreading to Britain's most buoyant market London, Lloyds Banking Group said.

Data from the bank's quarterly Commercial Property Confidence Monitor showed that the net balance of medium and large businesses expecting the UK property market to improve in the next six months fell to -24 in November, from -10 in August.

Of these, the net balance of firms based in London that were bullish about the market was 2.8 in November, down from 32.2 in August, a sign that gloom has spread to the UK capital which had bucked the national trend with a recovery in 2010.

A net balance is the sum of all positive and negative survey responses which ignores the middle ground. A positive number, for instance, would indicate that there were more bullish responses than bearish ones.

"It's clear that concerns regarding the Euro Zone are impacting upon confidence, especially at the higher end of the market where respondents are more likely to be active in Europe or provide space for European companies and investors," Lloyds's Managing Director of Corporate Real Estate, Lynda Shillaw, said in a statement.

"There appears to be a recognition that the challenging (world) economy is going to be here for far longer than anyone anticipated," she said.

UK property values fell for the first time in almost two and a half years in November and latest economic data from the euro zone is pointing to recession in the months ahead.

Shillaw also said that more European banks could stop lending to the property sector in first quarter 2012.

Lloyds classifies mid- to large-sized businesses as those that borrow 1-50 million pounds and major businesses as those with loans of more than 50 million pounds. The bank conducted its survey of 448 property decision-makers late last year.

Despite the fall in confidence, the biggest property players remain keen to invest over the next 3-6 months, with 53 percent of major businesses expecting to increase their investment and only 10 percent looking to divest, Lloyds said.

Smaller companies were more cautious, with 28 percent of medium to large businesses and 19 percent of small businesses planning to increase their investment.

The data also showed that there was little appetite for riskier non-prime investments, Lloyds said, adding that companies will be looking to hold on to good performing properties for the next 2-5 years before considering selling.

(Reporting by Brenda Goh. Editing by Jane Merriman)