But real estate industry figures have questioned whether the council has paid as much as $20 million too much for the site, directly opposite the Queen Victoria Market.

Lord mayor Robert Doyle on Wednesday morning said the council had agreed to buy the land and buildings on the corner of Queen and Therry streets.

"It's an investment in the market for our traders and the people who use it," Cr Doyle said of the land, owned by the Munro family for 104 years.

Cr Doyle this month released the council's own development guidelines for the 6500-square-metre block that includes a new 400-space car park, a walkway connecting Franklin and Therry streets, and restoration of the Mercat Cross Hotel.

The council said in a statement about the purchase that it was "not the highest bidder, but that the vendor was interested in protecting the historical legacy of the site".

Cr Doyle said any development on the site might involve a private developer, and end up being similar to the QV project, on Swanston Street and bounded by Russell, Lonsdale and Little Lonsdale streets.

The purchase incorporates properties at 93-141 and 143-151 Therry Street, 452-464 Queen Street and rear of 128-130 Franklin Street, Melbourne.

The site was acquired for 19,000 pounds by James Munro in 1910 to take advantage of the surge in popularity of the motor car. Mr Munro had obtained a licence to sell Clement-Bayard cars in Australia.

The property has been retained by his family ever since, with the exception of a couple of small parcels of land, including a McDonalds on Elizabeth Street, built after 1989.

Marketing agents for the site, Savills, said that the underbidder in the 1910 sale had been Melbourne City Council.

At least one industry expert raised eyebrows at the price paid for the site, saying that the council had paid $20 million over the mark.

"I would love to have seen where the other [offers] were," they said.

But marketing agent Clinton Baxter, who helped sell the property to the council, said there had been four other offers, each from mainland China, for the site, that were for more than Melbourne City Council had paid. "We were inundated with interest from across Asia," he said.