Property observers have warned that a “quiet credit squeeze” is negatively impacting Melbourne’s home auction market and could hit house prices next year.

But despite a tightening mortgage lending environment the city’s housing market produced reasonable results for sellers on the last big auction weekend of 2017.

On Saturday, the Domain Group reported a clearance rate of 68.8 per cent from a large sample of 887 reported auctions. A total of 1320 auctions were scheduled for the weekend, with vendors withdrawing 29 homes from auction. The results of a further 404 booked auctions are yet to be reported by agents.

The most expensive house reported sold was a contemporary four-bedroom, four-bathroom home at 12 Cole Street, Brighton. Located in the suburb’s Golden Mile beachside precinct, the brand new property sold through Marshall White for $5.5 million, which was below the initial $5.95 million asking price.

Other top sales for Melbourne included a four-bedroom Victorian terrace house on a 317 square metre allotment at 173 Drummond St, Carlton. It fetched $3,825,000 through Woodards, while a house at 6 Belmont Avenue, Deepdene, sold for $3,680,000 through Marshall White.

Buyers’ advocate Adam Woledge, of Woledge Hatt, said numerous off-market transactions for $1 million-plus homes were taking place, which was a normal occurrence as the market slowed down for Christmas and the summer break.

He said 2018 would be an interesting time for buyers and sellers as bank lending practices were tightening up.

“The effects of the changes to lending introduced by the Australian Prudential Regulation Authority have really had an impact and they probably will into next year as well,” he said.

“That’s the big thing for buyers at the moment.”

Greville Pabst, the executive chairman of PropertyDuo by WBP Group, said the market was being affected by a quiet credit squeeze and it was more difficult to obtain finance compared to 18 months ago.

“The goal posts have shifted in terms of eligibility for loans and the levels at which the banks will qualify people for loans,” he said. “The loan-to-value ratios have also changed, so it is harder to get money.”

Home owners in some prestige suburbs – Toorak, Armadale and Canterbury, for example – typically have substantial amounts of equity in their properties. But other areas such as Brighton have historically seen a much higher level of gearing in their residential markets. As a result, these suburbs could be more quickly affected if official interest rates rise or bank lending further tightens.

Mr Pabst said it was harder to borrow large sums of money: “If you are looking at buying a $5 million house, you basically have to put down 30 per cent in cash: the banks won’t lend more than 70 per cent for anything over $3 million.

“On $3 million, you basically have to put down $1 million plus stamp duty. Not many people have a million bucks lying around that they can use to put equity into a deal.”

The market for mid-priced and entry-level property was hit and miss on Saturday.

About 30 onlookers turned out to see Hocking Stuart auctioneer Daniel Atsis try to find a buyer for a small double-fronted period house at 62 Appleton Street, Richmond.

But the property in a light industrial area near the Victoria Gardens shopping centre did not get a genuine bid. Quoted at $1 million to $1.1 million, it was passed in on a $1 million vendor bid. The published reserve is $1.05 million.

Buyer’s advocate Miriam Sandkuhler, from Property Mavens, said the market was slowing down in the lead up to Christmas.

“Crowd attendances in the north and the west appear to be shrinking, however good quality stock is being absorbed when vendors’ reserves are realistic and agents don’t underquote,” she said.

She attended several slow-to-start auctions at the weekend.

At the auction of 21 Locksley Avenue, Reservoir, the bidding kicked off with a vendor bid of $650,000. Three bidders then stepped into the auction ring, but the property was passed in to a young couple for $750,000. After the post-auction negotiations, the three-bedroom house was sold by McGrath Northcote for $775,000, well ahead of its $650,000 to $700,000 quote.

Frank Valentic, from Advantage Property Consulting, also reported small crowds at auctions and lower rates of bidder participation.

He said a two-bedroom art-deco house at 14 Hammerdale Avenue, East St Kilda drew a crowd of 25, including a bidder couple in their 30s and young single male bidder.

The Buxton listing snared an opening bid of $1.25 million. It was on the market at $1.4 million before selling to the couple.

“It wasn’t a runaway result; the property sold for just over reserve at $1,412,500,” Mr Valentic said.

The lack of tearaway results appears to be a phenomenon across different price brackets.

Among the high-end properties that have changed hands quietly in the past few weeks is a large Queen Anne-style residence at 23 Barry Street, Kew.

Marshall White auctioneer Doug McLauchlan sold the five-bedroom home at a private mid-week auction this month. The property was appraised by the agent at $7 million. It subsequently sold for $7.1 million to the sole bidder at the private auction.

Mr McLauchlan said buyers and sellers were seeing a market that had peaked after a very long growth cycle and which was also being affected by the new state government controls on price quoting.