The East Melbourne house built for colonial artist Eugene von Guerard fetched $1.75 million at a hotly contested auction over the weekend, nearly 20 per cent above its reserve price.
Four bidders put up their hands for the heritage-listed Georgian property at 159 Gipps Street, which was built in 1862 and owned by the Casey family since 1939.
Jellis Craig Bennison Mackinnon agent Iain Carmichael took a genuine bid of $1.3 million to start the auction and declared it on the market at $1.47 million. Two bidders, kept the auction going in ever smaller bids to reach the final price.
Agent Nathan Waterson said the local buyer was attracted to the house's architectural and artistic heritage.
The property, Little Parndon, had been the townhouse of former governor-general Lord Casey and Lady Casey. Since Lady Casey's death in 1983, it has been occupied occasionally by visiting artists, according to the East Melbourne Historical Society.
As the editor and co-writer of Early Melbourne Architecture, published in 1953, Lady Casey spearheaded Melbourne's conservation movement.
Von Guerard added a rooftop studio to the house in 1866 and lived there until he returned to Europe in 1882.
He painted the country properties of the rich and powerful during the 19th century, using his earnings to build his house.
One of von Guerard's paintings, The farm of Mr Perry on the Yarra goes to auction as part of the Grundy Collection, on June 26, through Bonhams, and is expected to fetch between $900,000 and $1.2 million.
The rich and powerful are still buying art but they are spending hefty sums on real estate as well, with the sale of 1 Towers Road in Toorak for about $25 million.
Future Fund board member and former JP Morgan chairman Brian Watson and his family have lived in the house since 2001. The buyer is understood to be a local and the deal was negotiated by Kay & Burton.
Buyers advocate David Morrell reckons about half of the transactions at the top end are occurring off-market.
"You look at the auction results and it looks like no one is buying or selling over $4 million but they are - it's just happening off-market," Mr Morrell said.
Melbourne's auction market recorded another solid clearance rate of 70 per cent over the weekend from 740 auctions, compared with the 65 per cent posted on the long weekend and 53 per cent on the same weekend last year.
The REIV reports that 219 properties passed in, 146 of them on a vendor bid; and a further 39 results are yet to be reported.
Winter has so far proved busy for the increasingly healthy property market, with the REIV expecting about 3175 auctions to be held in June.
The only time in the past 10 years that there have been more auctions in June was in 2010, at the market's last peak.
Next weekend the REIV expects about 750 auctions. A double-storey terrace house on a corner block at 85 St Vincent Place in Albert Park will be closely watched.
Cayzer Real Estate director Geoff Cayzer expects it will fetch more than $6 million on Saturday.