06 Feb 2026
Words Lucy Slade, Michael Read and Paul Karp Australian Financial Review

Ultimate trophy property: The Sydney Harbour island up for sale

The Defence Department is selling Spectacle Island in Sydney Harbour as part of its $1.8 billion divestment of 67 sites across Australia, with the potential for a private buyer to help the small, unfamiliar parcel of land live up to its name.

Spectacle Island, near Drummoyne on the Parramatta River section of the harbour, has been vacant since 2023 after the navy history collection it housed was moved to Banksmeadow in Sydney’s east. The island was established in 1865 to store gunpowder.

Defence Minister Richard Marles on Wednesday announced the island would be sold, after an independent audit identified it was among dozens of sites of no strategic use to the military.

The department’s sprawling property portfolio includes 2.8 million hectares of land in Australia, 70 major bases, 28 airfields, 72 training areas and 61 wharves.

Notable parcels of land to be sold include HMAS Penguin in Mosman on Sydney’s lower north shore, RAAF Williams at Melbourne’s Point Cook, and the Victoria Barracks in Sydney’s Paddington, Brisbane’s Petrie Terrace, and Melbourne’s Southbank.

Defence will soon transfer ownership of the sites to the Department of Finance, which has experience selling government land. Finance will begin a consultation process to determine the optimal buyer profile for each of the 67 sites. Some sites will suit residential developers, while others will likely be sold to state governments.

In the case of Spectacle Island, a future buyer will have to contend with a heritage listing covering the island’s buildings, as well as the fact it sits in the Sydney Harbour National Park.

No decision has been made about the optimal buyer for the island, though the NSW government would likely need to update the island’s zoning requirements were it to go private.

Owning an island appeals to Australia’s richest residents, with billionaires Andrew and Nicola Forrest buying Lizard Island for $42 million, and Mike and Annie Cannon-Brookes snapping up Dunk Island for nearly $24 million, both in Far North Queensland, before their marriage separations.

But Sydney Sotheby’s International Realty managing director Michael Pallier said the federal government may not decide to sell Spectacle Island to the highest bidder as it would likely prefer it went to someone who would maintain it, or put it to good use.

“I think it’s the ultimate trophy property,” Pallier said. “I feel this is an incredible opportunity for anyone who’s looking for something special and has got the money, whether it’s a company or a private individual.”

Pallier believed it was unlikely the state government would buy the island due to its cost – which could be calculated when it was revealed what could be built there – and the expense of its maintenance.

NSW Housing Minister Rose Jackson said on Thursday that the state government was looking to buy defence land on which homes could be built.

“We’re going to explore those sites, they’ve only just come online … But we are in the market for land opportunities to deliver housing,” Jackson said.

Property accommodation specialist ResortBrokers director Tim Crooks said no island in Sydney Harbour had been offered for sale to private interests in recent history, so interest from the nation’s top developers could be intense.

“Sydney is a boat-centric city. We’ve seen how boat-activated destinations like the new Sydney Fish Market have really taken off,” he said.

“Being an island, Spectacle obviously has the potential for boat-driven activation.

“Spectacle Island would be highly suitable for an events-based-plus-accommodation hospitality offering. If there were a tender for developers for Spectacle, I’m sure you’d get some very special proposals; perhaps a boutique hotel that utilises the island’s heritage-listed buildings to create a unique accommodation offering.”

Crooks said the island’s military history as a naval armament depot was rich and quirky, which suited a world where people were chasing unique experiences to post on social media.

While developers are already seeing the tourism potential in many sites, NSW veterans minister David Harris said the federal government must consult “veterans and their families who have deep connections with these sites”.

‘Architecturally significant’

The Defence Estate Audit says the island’s buildings are “significantly degraded due to limited routine maintenance, accessibility challenges, low operational activity, heritage buildings and high maintenance costs”, despite the federal government spending more than $4 million since 2023 to maintain it.

Heritage partner at Urbis Kate Paterson said it was not difficult to restore heritage buildings as older construction was very straightforward because there were not many materials to use.

“This is a once-in-a-generation opportunity to allow people to go and enjoy this place. If there’s a redevelopment that allows public access [it would be] an incredible contribution to the city’s cultural landscape beyond what it already is just visually,” Paterson said.

She said the mid- to late 1800s buildings on the island were unique, architecturally significant and beautiful, and she hoped it will become something that was open to the public.

“There needs to be something that’s going to give it that layered soul to draw people in … You’ve got some really early colonial architecture on there, which I think will be in demand,” Paterson said. END