Shanghai has doubled, to 3 per cent, its sales tax on luxury homes - the sector mainly responsible for the city's property bubble. The tax rise, effective yesterday, was imposed after orders from the central government to curb property speculation, which has made housing unaffordable for many. Luxury flats in Shanghai are defined as those located in the city centre costing more than 17,500 yuan per square metre and bigger than 140 square metres, according to a directive by Shanghai's tax, finance, urban planning, and housing and land resources bureaus. Cheaper and smaller flats would be defined 'affordable' and taxed at the current rate of 1.5 per cent. The government will review the thresholds every six months. It also imposed a 5 per cent sales tax on flats that change hands within two years, in line with an order from Beijing when it announced a wide range of measures to cool the property market last month. 'Shanghai's objectives for adjusting and controlling the property market are extremely clear. The policies are multi-faceted, having the effect of control,' said Shanghai government spokeswoman Jiao Yang . 'We must meet consumer demand and regulate investment and speculation.' Property prices in Shanghai rose 19 per cent in the first quarter of the year, well above the 12.5 per cent rise for the country as a whole. Much of Shanghai's price surge in the past few years has been driven by Hong Kong and Taiwanese investors. But since March, the city has imposed various cooling measures, including a capital gains tax of 5.5 per cent for flats sold within one year of purchase and requiring higher down payments when buying second and third flats.