UK real estate sterling lending drops in Q3 -JLL

* Total Q3 lending falls by 2.5 bln stg to 244 bln stg

* High lending margins challenge current property prices

* Lending margins seen edging lower over next 18 months

LONDON, Nov 5 (Reuters) - Sterling bank lending to real estate borrowers dropped in the third quarter for the first time since December 1997, showing property credit markets remained broadly depressed, data showed on Thursday.

Property consultant Jones Lang LaSalle (JLL.N) data showed total lending dropped by 2.5 billion pounds to 244 billion, including lending by building societies, against growth of 3 billion pounds in the second quarter.

Jones Lang LaSalle said the figures highlighted that real estate credit markets remain broadly depressed, with little more than a handful of banks truly active in the market.

Many of the respondents to the Jones Lang LaSalle Lenders Expectations Survey said they expected margins to tighten through greater competition, although these reductions were not expected to be substantial.

The survey suggests that whilst margins on best prime investment will fall from a current level of 200-250 basis points over the next 18 months, most lenders think it is unlikely they will be below 150 basis points before end 2011.