Chinese real estate stocks are close to losing all the gains notched during last year’s massive reopening rally as troubles mount for the debt-laden sector.

A Bloomberg Intelligence gauge of real estate stocks trading on the mainland and in Hong Kong is less than 3% away from piercing below its end-October trough, which was the lowest since 2011. The gauge had surged 88% in less than six weeks back then as China’s move to dismantle Covid controls and a gamut of supportive measures for the property sector raised hopes for a revival.

That optimism has now been replaced with deeper fears as snowballing debt problems push even the largest developers to the brink of default. A host of measures by the authorities to boost sales has provided only fleeting support. A relentless selloff has reduced former property stars such as Country Garden Holdings Co. and Sunac China Holdings Ltd. into penny stocks.

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China’s real estate industry is caught in a vicious cycle where failing developers make households reluctant to purchase homes, which again crimps the cash flow of companies. China’s new-home prices fell again in July, while Bloomberg reported that figures are likely far worse than what official data suggest.

With more cities reporting sequential declines in new-home prices for July, “the country’s housing sentiment seems unlikely to find a bottom soon,” Bloomberg Intelligence analysts Kristy Hung and Lisa Zhou wrote in an Aug. 24 note. “Buyers may stay sidelined until the pricing trend turns around, setting a tone for a negative feedback loop.”

With the property sector a key driver for China’s economy, its weakness is stoking concerns about further outflows from the nation’s assets. The gauge of developer shares erased earlier gains to edge lower again on Thursday. The CSI 300 Index of mainland shares has lost more than 7% this month, among the world’s worst performers.