Yarra council has been forced to back down on a controversial proposal that would have allowed its CEO to buy and sell property worth up to $10 million without councillor approval, after receiving overwhelming community backlash. 

The announcement was made in a statement issued to local residents on Monday afternoon, just hours after community consultation closed on its draft strategy outlining the council's five-year plan for its property portfolio.

"We have received a large amount of feedback relating to officer delegations and the acquisition and sale of properties," the statement read.

"Based on this feedback, officers will be recommending that any future property acquisitions and sales should be a decision of the Council and this will be reflected in the final strategy that will be considered by Council for adoption in August."

The original proposal would have given the council's CEO the power to buy and sell community assets valued at up to $10 million without requiring a council vote – a tenfold increase of the financial delegation approved in November.

Yarra's reversed position has been welcomed by several major resident groups, including Yarra Residents Collective and Fitzroy Residents Association, which raised concerns council-owned property could be sold off without any oversight, and argued the move was anti-democratic.

"They managed to annoy virtually every community group in Yarra at the same time," said Adam Promnitz, head of the Yarra Residents Collective.

"It's unprecedented in the amount they've been able to antagonise the community.

"We're relieved that it's happened, but the question that needs to be asked is why the executives were doing this and how did they so blatantly misread the community?"

The ABC understands Yarra CEO Sue Wilkinson went on leave on Monday and will return next week.

Michael Spencer from the Fitzroy Residents Association said it was "incredibly satisfying" to see the council back down.

"They had it the wrong way. They wanted to get the delegation to sell, before they'd even given much thought to what they were going to sell," Mr Spencer said.

"And that opened up the community to say, 'Well, you could be selling anything.'"

Yarra council did not respond to questions from the ABC requesting further details and if the current $1 million CEO delegation would remain in place.