CHINA'S property sector shrank at a faster pace in the final three months of last year as the country's housing slump continues to take its toll on the economy.

Output in the real estate sector shrank 2.9 per cent in the fourth quarter after a 1.6 per cent contraction in the previous three months, the National Bureau of Statistics said Tuesday in a supplemental report on gross domestic product. That was the first consecutive quarterly decline since 2008.

The construction sector also saw its output decline by 2.1 per cent during the same period. Those two sectors combined were 13.8 per cent of national output in 2021, according to Bloomberg calculations, lower than the 14.5 per cent in 2020.

Despite authorities' efforts to ease some restrictions on real estate funding, China's property market slump persisted in December, with the downturn spanning developers' sales, investments, land purchasing and financing activities.

Property investment in December shrank 14 per cent from a year earlier, according to Bloomberg calculations. For the full year, it grew 4.4 per cent.

China's economy in the fourth quarter grew at the weakest pace in more than a year, weighed down by the housing slump and weak consumer spending, data released Monday showed. Gross domestic product expanded 4 per cent from a year earlier, down from 4.9 per cent in the previous quarter.

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China's debt-saddled property developers have seen their offshore bonds lose US$82 billion in value, and more losses and defaults are likely, analysts at Bloomberg Intelligence said.

Investor concerns about concealed debt at Logan Group Co on Monday fuelled a heavy sell-off in Chinese dollar bonds, both investment-grade and and high-yield. A key interest rate cut by China wasn't enough to stem a drop in property stocks, with traders calling for more policy support as the economy slows.

The market capitalisation of China property's offshore bonds has dropped from US$151 billion of par value to US$69 billion of market value, indicating more than US$80 billion in investor losses, Bloomberg Intelligence credit analyst Andrew Chan wrote in a note. This excludes losses from onshore bonds.

If China refrains from aggressively easing property policy, more losses and defaults could be coming, he said. Should a developer with a national footprint run into trouble, home buyers worried that projects may not be completed could end up avoiding purchases from all private property firms.

China's debt-saddled private property developers face growing risks of a liquidity crunch, with home buyers and bondholders' shattered confidence raising the spectre of broader financial contagion, Bloomberg Intelligence real estate analysts Patrick Wong and Kristy Hung wrote in a note.

Some companies may take a cue from Guangzhou R&F Properties by extending debt terms or taking a haircut on portions. Companies may also follow Sunac China Holdings and Shimao Group Holdings with equity placements at ultra-low valuations and deep discounts, they said.

Top state-owned developers such as China Overseas Land & Investment and China Resources Land, with balance sheets exceeding US$1 trillion, could be well-positioned for M&A as they buy from distressed, private-sector competitors at fire-sale prices.

Logan Group bought back shares for HK$5.5 million (S$950,000), paying HK$5.47 to HK$5.86 per share, it said in a statement to the Hong Kong stock exchange Monday evening. The company bought 3 million of its shares for HK$17 million on Jan 14.

Country Garden Holdings bought back an aggregate principal amount of US$5 million of its 4.75 per cent notes due July 2022 and US$5 million of its 7.25 per cent notes due April 2026, according to a statement to the Hong Kong stock exchange late Monday.

The repurchased notes will be cancelled and the company will monitor markets for further bond buying.

And in the latest ratings downgrade to hit China's property sector, Times China Holdings' long-term rating was cut by S&P Global Ratings to B+ from BB-, putting it further into junk territory, with its outlook changed to negative from stable.

According to a statement from the local housing regulator published Thursday and reported Monday, the government of West Coast New Area in the east Chinese city of Qingdao halted sales of two home projects of Country Garden and a project of China Aoyuan Group because of violations in sales. The authority told the two developers to rectify problems before allowing them to resume sales. BLOOMBERG