Creation of Shanghai free-trade zone prompts 20pc rise in property prices
Analysts warn people may have become overly optimistic about the project in Pudong, Shanghai
Prices of property in areas surrounding the newly established free-trade zone in Shanghai's Pudong New Area have soared by up to 20 per cent in the past two months, triggering warnings of irrational exuberance among investors.
"People may have become over-optimistic about the central government's policy towards the free-trade zone," said David Hong, head of research for data provider China Real Estate Information.
The surge in prices was fuelled by speculative investments driven by inflated expectations about the effect the zone might have on property values, said Hong.
He said investors should be reminded that Premier Li Keqiang and other top officials were absent from the official launch of the zone last Sunday, signalling it may not be at the top of the Beijing policy agenda.
"At least for the short term prices have reached a high point. If, and how much further they may go up - or come down - will now depend on macro- economic factors rather than the free-trade zone idea itself," said Hong.
Since the proposal to create a free-trade zone was announced in July, property prices in the surrounding area had risen by 15 to 20 per cent, compared with a 10 per cent rise in the overall Shanghai real estate market, said David Zhang, research director at Centaline China in Beijing.