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. The sharp jump in prices was driven by speculative buying, said Zhang, and investors appeared to be unaware that the zone would not be built overnight and much policy detail had yet to be provided. "So far it looks as though current policy announcements have had no substantive impact, and the full convertibility of the yuan, for instance, will not be implemented as people had hoped," said Zhang. "Perhaps investors are banking on more than what might be delivered in the zone." Centaline's Zhang questioned whether such a free-trade area would provide an attractive place for home developments. "Speaking from the perspective of an apartment buyer I would say the area may be perfectly equipped for companies involved in, say, providing logistics services, but will that mean it will have schools and hospitals and things like that?"