That was reflected in weekend auction data, which showed first-home buyers were the most active in the market. Sales to first-timers are up by 25 per cent to 30per cent at Craigieburn in Melbourne’s northern growth corridor, which Lend Lease and Stockland dominate.

“We’re actually selling off the plan in Craigieburn, because we don’t have enough physical product to cope with demand from the first home owners,” Stockland managing director Matthew Quinn said.

“It’s all contingent on bank lending. Interest rates in England are the lowest they’ve been since 1694, but who cares if you can’t get any money?”

There is a risk that demand could plunge again after June30, when the grants are cut from $21,000 back to $7000. Industry pundits, however, are confident the Federal Government will extend the first home buyer grant in some form, but that won’t be clear until the May budget.

The head of the residential division at Lend Lease, David Hutton, said sales had fallen, then stabilised since October.

“I think you’ve got a government here at the moment looking to create sales. The reality is the housing market in Australia is not oversupplied – it’s very different from other markets overseas.”

ANZ chief economist Saul Eslake said he was not surprised developers were stemming supply. “These are market conditions … that is why I am normally sceptical about these grants, as in many cases they do result in just simply pushing up the price of houses.” But in the “unusual circumstances”, in which buyers have the upper hand, grants can work, he said.

Over the weekend, the general market auction clearance rate was a strong 77 per cent but on only 436 properties, well down on the 1146 offered at the same time last year.

More than a quarter of all properties were sold before auction, which agents said reflected vendors’ continuing apprehension about the market.