These factors, coupled with generous first-home owners' grants - which from July 1-September 30 will increase from $26,000 to $32,000 for new homes - pushed metropolitan auction clearance rates to 86per cent last week.

Real Estate Institute of Victoria chief Enzo Raimondo said the only time the sales figure had been higher in the past seven years was the peak of 89 per cent in July 2007.

The soaring clearance rate comes as demand from buyers continues to outstrip stocks. Private sales have also risen to a record high, with 15,354 properties selling this year to date compared with 15,060 in 2007.

"This is an exceptional result that indicates the growing confidence consumers have in Melbourne's property market, regardless of the wider economic problems," Mr Raimondo said. "I don't think we're going into a boom, but it's hard not to see strong similarities between recent market activity and what was going on in 2007."

Stan Coolegem, of Barry Plant Cranbourne, said: "The bottom end of the market - up to $300,000 - is strong with the boost in first-home buyers' grants stimulating demand. We sell about 65 per cent of our properties to first-home buyers and so we expect a bit of a slowdown when the grants end."

Mark Guthrie, of Ray White Cranbourne, said: "Cranbourne is a hot spot at the moment. There is massive demand for properties, far exceeding supply. First-home buyers make up a big proportion of our customers but investors are now entering the market to take advantage of the conditions. When the grants tail off in September there will still be strong demand."