The crowd watches auctioneer James Tostevin sell 8 Johnson Street, Hawthorn, for $1.81million.

The crowd watches auctioneer James Tostevin sell 8 Johnson Street, Hawthorn, for $1.81million. Photo: Paul Jeffers

Melbourne's auction market bounced back on Saturday. The Domain Group posted a 74 per cent clearance rate from 367 auctions, which was well up on last weekend's lacklustre 67 per cent clearance rate.

But some property buyers and prospective vendors are adopting a "wait and see" approach as slower activity continues to test the market.

Buyers are concerned at the low volume of stock available. Would-be sellers, on the other hand, are weighing the declines in Melbourne's auction clearance rate and in the level of house price growth since September last year.

Auction numbers for February are currently tracking at 25 per cent below auction activity recorded in February 2014. The Domain Group expects this gap to tighten to a 10 per cent decline on the February 2014 numbers once more than 1260 properties go to auction on the "Super Saturday" of February 28.

But listings in Melbourne's coveted eastern suburbs are well down on 2014 volumes, indicating that some prospective vendors are biding their time.

At this time last year clearance rates were running at 75 per cent and auction volumes were one-third higher.

In the next few weeks, buyers and sellers will get a clearer idea of the market's direction. February 28 will be a bellwether day, although some estate agents say the true state of play won't become apparent until after March's Labour Day long weekend.

"If the bidding performs along the lines of the numbers that are inspecting properties, then the market should be OK," Nelson Alexander's sales director Arch Staver said.

Mr Staver believes sales will be most robust in inner Melbourne. "There is some cash floating around and steady incomes in the inner city," he said. "Lower interest rates make the difference for certain people.

Paul Bond, of Hodges Sandringham, said buyers were cautious. "We are getting a lot of activity at our open houses but once we get to the pointy end of auction day, we find we don't have as many buyers as we thought we had."

Conditions are difficult to read at the moment because too little supply has come on.

Activity in aspirational suburbs will spike up in coming weeks, and supply constraints should lift prices in key areas. Carlton North, for example, has a small stock of 2089 houses, according to the Australian Bureau of Statistics. Hawthorn has 3990 houses. Hampton, by contrast, has 5188 houses.

Domain Group senior economist Andrew Wilson said as auction numbers grew and more inner suburban properties were listed, property owners would get a better idea of how the market was travelling.

"Inner-city properties, particularly in the inner east, have higher clearance rates and we are yet to see the inner east come to the party," Dr Wilson said.

CoreLogic RP Data spokesman Robert Larocca said the recent lower clearances could be due to low stock. "Or it could be that the trend we saw over the last quarter of last year, where the market slowed down, is actually a firm trend as opposed to the market sagging under the weight of spring and summer volumes," he said.

Last week, the ABS said prices for established houses in Melbourne grew by 1.1 per cent over the December quarter. The ABS measured total price growth in the city for 2014 at 5.4 per cent, well down on the growth seen in 2013.

There are 863 auctions scheduled for next weekend.