Luxury properties in sought after areas of Shanghai remain in demand despite the introduction of new taxes and other cooling measures, the latest report on the Chinese city’s residential market by Knight Frank shows.

According to the report the average transaction price will continue to grow, boosted by the launch of new projects. Also, due to the positive impact of the China (Shanghai) Pilot Free Trade Zone and the lack of residential properties within the Zone, surrounding residential projects will face a new round of growth in sales price.

The report shows that the land market remained buoyant in the third quarter of 2013, with 32 residential plots transacted, up 88% on the previous quarter.

However, sales of residential properties priced over RMB 100,000sqm (£10,150sqm) have decreased by 27% since the second quarter this year.

It is also thought that the rental market in Shanghai is being negatively influenced by the economic recession in Europe and the US. Arrivals of managerial level expats to Shanghai decreased significantly in the third quarter. Leasing demand weakened whilst the occupancy rate fell to 94.1% with a quarter on quarter decrease of 1.8%.