A group of China investors has canceled plans to purchase an office tower in Sydney as tensions between China and Australia escalate.

The group said its decision to withdraw a $58.5 million bid for the property was made after regulators delayed approval.

The Australian Foreign Investment Review Board delayed approval of the purchase for more than eight months. Experts say the delay may be related to the growing trade tensions between the two nations - which have already spilled over in the tech and property sectors.

The cancelation raised concerns over the future of Australia's real-estate sector. China investors account for a good portion of property sales and transactions and an outright boycott would spell trouble for the sector.

"If the 191-199 Thomas Street situation is not an isolated incident then this has significant ramifications for our property industry and it raises many questions," analysts at real estate company Colliers International said.

The proposed sale was for an eight-story office building in Sydney's Chinatown. The group of private China investors said two months had passed since Australia's review board was due to respond. It said the property was a generic commercial office investment and had no government or other "sensitivities" that would warrant a delay.

Since 2013 China investment in Australia has been increasing. Purchases like the Thomas Street transaction are common and a staple for China investors. Property experts said this was likely the first of many investment board roadblocks that would halt future property deals.

In March, Australia imposed changes to its foreign ownership laws, including new processing times for foreign investment applications. The country said the measures were necessary to "safeguard" Australia companies struggling from the pandemic from being taken over at reduced prices.

Some China businesses opposed the changes - with some saying they were targeting China investors. China cautioned Australia that it needed to ensure that its laws were "fair and nondiscriminatory."