Space contacts belong to a work space and not to an app, which is why we can not just allow full access to all space contacts when using app authentication.
But it is inconsistent that you can create space contacts using app auth, but not update or delete them. We will update the update and delete contact method to be usable with app auth. However, you will only be able to update and delete space contacts you created when authenticated as the app, so make you only do that or have some error handling in place.
These changes should be deployed and available to you before the weekend.