FRANKFURT (Reuters) - Spanish bank Santander has sold control of property worth 10 billion euros ($12 billion) to U.S. investor Blackstone Group, following its rescue of Banco Popular.


The biggest property sale in Spain comes amid renewed investor enthusiasm with prices gradually recovering following Spain's property and financial crash.


The property, which includes land, houses, apartments and hotels, had lost two thirds of its value. It was originally worth 30 billion euros.


The deal will involve the creation of a new company where Blackstone owns 51 percent and Banco Popular the remainder, buoying Santander's capital.


It follows a rescue of Banco Popular earlier this year by Santander, Spain's biggest lender.


Popular's rescue was unveiled in June, echoing a banking crash five years ago that cost Spain 40 billion euros.

Residential construction is coming back to life in Spain more than eight years after a property crash, with foreign investment pouring into developments in Madrid and Barcelona, and a jump in building permits pointing to more growth to come.

Roughly half a million newly-built homes remain empty after the mania that peaked in 2007, largely on urban fringes and in more remote areas.

But demand for properties in leading cities and industrial regions is rising.

Construction and real estate accounted for more than a third of the nearly 22 billion euros of foreign investment in Spain in 2015, Economy Ministry data shows.

(Writing by John O'Donnell; editing by Jason Neely)