A unique volume of fairytales handwritten and illustrated by JK Rowling fetched nearly £2 million at auction today, far surpassing Sotheby’s estimated selling price of a mere £50,000.

The buyer, the London art agents Hazlitt, Gooden and Fox, now owns one of just seven copies of The Tales of Beedle the Bard, and the only one to be sold on the open market rather than given to family and friends.

Bound in Moroccan leather with silver mounts and adorned with moonstones, the book eventually fetched £1.95 million, almost 40 times Sotheby’s original estimate. The proceeds are to go to a children's charity co-founded by the author.

The auction sparked feverish scenes at Sotheby’s, with the standing-room-only crowd applauding fiercely as bidding topped the £1 million mark, and again when it stopped just £50,000 short of £2 million.

The price is the highest ever achieved at auction for a modern literary manuscript, an auction record for a work by JK Rowling and an auction record for a children’s book.

“We have to reach back 80 years to find a comparison when we sold the manuscript of“Alice’s Adventures in Wonderland” on behalf of the original Alice,” Philip Errington, Sotheby's book expert, said.

The volume of five fairytales was produced by Rowling, 42, as a final farewell to her magical hero, Harry Potter.

It is intended as the real-life version of the book that Albus Dumbledore, the headmaster of Hogwarts, bestows to Hermione Granger, one-third of Potter’s evil-fighting trio, in the seventh and final book in the series, Harry Potter And The Deathly Hallows.

It contains clues to aid Harry and his friends in their quest to defeat the Lord Voldemort, an evil wizard of extraordinary powers who killed Harry's parents.

Of the five stories in the book only one, The Tale of the Three Brothers, is told in the seventh Harry Potter book, which became the fastest-selling book ever when it was published in July this year.

In a dedication at the front of the book, Miss Rowling writes: “Six of these books have been given to those most closely connected to the Harry Potter books during the last 17 years.

“This seventh copy will be auctioned, the proceeds to help institutionalised children who are in desperate need of a voice.”

“So, to whoever now owns this book, thank you - and fair fortune be yours!”

The proceeds from the sale will benefit The Children’s Voice, a charity co-founded in 2005 by Miss Rowling and Emma Nicholson, a member of Britain’s House of Lords.

Following the auction, an astonished Miss Rowling said: “I am stunned and ecstatic. This will mean so much to children in desperate need of help. It means Christmas has come early for me.”

The author, whose Harry Potter books have sold almost 400 million copies and been translated into 65 languages, wrote the Beedle tales after finishing the Potter series.

Writing in the sales catalogue, she said: “The Tales of Beedle the Bard is really a distillation of the themes found in the Harry Potter books and writing it has been the most wonderful way to say goodbye to a world I have loved and lived in for 17 years.”

Miss Rowling performed a public reading of some of the five wizardry tales at Sotheby’s earlier in the week to promote the auction.

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