Mayor Bruce MacKenzie pumped his fist in celebration when the hammer fell, confirming the council will buy the two-storey building occupied by Defence Force Recruitment on Hunter Street.

Cr MacKenzie was at his bullish best after the auction, and said investment would help secure the financial future of Port Stephens.

"I don't give a stuff if it's in Darwin as long as it makes the council money," Cr MacKenzie said.

"Tell Newcastle [City] Council we've snuck in here and got it from under their noses."

The investment in prime Newcastle real estate marks a significant change in direction for the council under Cr MacKenzie's leadership.

He claims a large amount of responsibility for property investments made by the council in the 1980s and 1990s, and yesterday indicated he wanted more "bricks and mortar" investments.

"This means that down the track we may not have to increase rates," he said.

The 20-year-old building had a $2 million refit before being listed for sale.

It was scouted by the council's commercial property manager Carmel Foster and its purchase will be entirely funded by the recent $10 million sale of a Heatherbrae site to mining contractor Sandvik.

The council can expect to make about $507,000 a year in rent from the two-storey building, a 9 per cent yield on the investment, bringing its annual income from its property portfolio to more than $2 million.