Restrictions on home purchases are spreading to more second- and third-tier cities, increasing the chance capital will flow back to first-tier cities' commercial properties, analysts said on Tuesday.

The central government said it will expand limitations on property purchases to more second- and third-tier cities, where real estate prices saw substantial growth through the influx of speculative money from first-tier cities.

"Due to the restrictions imposed on major cities' residential properties, many small to medium-sized investors in Shanghai municipality, Zhejiang and Jiangsu provinces chose nearby second- and third-tier cities to invest in. Consequentially, we have seen average rents and property prices in these areas surge in recent months," said Vicky Shen, director of DTZ's office department, East China.

Despite the overall cooling of property prices in June in the nation's 70 major cities, second- and third-tier cities have replaced Beijing, Shanghai, Guangzhou and Shenzhen as leaders in home price increases, most of them registering a more than 5 percent growth rate year-on-year in June, according to figures released by the National Bureau of Statistics on Monday.

"As more purchasing curbs are tacked on second- and third-tier cities, the speculative capital will roar back to the first-tier cities' commercial property market," Shen said. Many small and medium-sized investors flush with capital have been looking for opportunities in the commercial sector since the clampdown on residential investments in major cities, she said.

"Particularly as high-speed railways lessen the distance across the Yangtze River Delta, investors would naturally prefer properties in Shanghai to other cities in this region," Shen said.

"Many investors are looking for a commercial space of 100 to 200 sq m valued at about 10 million yuan ($1.55 million)," she added. "Since you cannot buy residential properties in Shanghai anymore, my aunt bought an apartment in Yunnan province recently," said 32-year-old Shanghai native Zhou Yi. She said many of her relatives are buying flats in second- and third-tier cities. "I've heard so many stories about buying property in Jiaxing and Haining, Zhejiang province, and other nearby cities over the past few months," she added.

Noting the government's restrictions on residential property purchases, Chen Jun, deputy chairman of the Zhejiang Chamber of Commerce in Beijing, said small and medium-sized enterprises in Zhejiang started shifting to the commercial and industrial property market as early as 2007.

"Inflation, the yuan's appreciation, along with the rising cost of labor and raw materials eroded our industrial enterprises' profit margin, and we found commercial properties the best investment," Chen told China Daily.

Lu Qilin, research director at Shanghai Deovolente Realty in Shanghai, agreed with his counterpart that it is likely that commercial properties in first-tier cities will become the next investment focus. "Compared with the stock market or buying gold, property investment will provide higher returns, considering China's urbanization trend over the next three to five years. Meanwhile, small and medium-sized investors are more willing to invest in major cities because they are more familiar with the market there," Lu said.