‘An incredibly rare proposition’: Sydney Harbour island up for sale

An Aboriginal land council is leading a push for a small but historically significant island in Sydney Harbour to be returned to traditional custodians after the site was listed for sale as part of a sweeping $3 billion sell-off of surplus defence land.

Spectacle Island is at the centre of a growing debate about whether prominent public assets with deep historical value should be sold to private interests after the two-hectare former naval outpost was included in a list of 67 defence properties set to be divested by the federal government to fund modern defence priorities.

Vacant since 2023, Spectacle Island has played a quiet but consequential role in Australia’s defence history – first as a gunpowder store established in 1865, later as a naval munitions depot, and more recently as a storage base for the Royal Australian Navy’s heritage collection.

The island contains about 40 heritage buildings, including 19th-century powder magazines and laboratories.

Its listing has ignited discussion about whether surplus defence sites should be sold off or repurposed for public uses such as open space, cultural facilities or social and affordable housing.

While the NSW Government has confirmed it is considering housing options for another defence site, Victoria Barracks in Paddington, Planning Minister Paul Scully was less specific about Spectacle Island, saying NSW would “engage constructively” with the federal government as opportunities arose.

The Metropolitan Aboriginal Land Council is preparing a formal request to the federal government for Aboriginal ownership. Metro LALC chief executive Nathan Moran said the proposed sale was an opportunity to address historic land dispossession.

“More than 99 per cent of our backyard has been taken from us and rather than being sold off to private interests for the highest price, this is a rare opportunity for the federal government to help correct past injustices while creating new economic and cultural pathways for our people,” he said.

Moran said Spectacle Island, together with nearby Goat Island – which remains subject to final transfer negotiations with the NSW government – could support Indigenous-led tourism, education programs and cultural events.

“Over 70 per cent of visitors to Sydney seek an Aboriginal cultural tourism experience, and right now there’s nowhere to deliver it at scale within the harbour,” he said.

The listing has also sparked speculation that the island could be sold to private buyers and repurposed for uses such as boutique accommodation, hospitality or events.

That would align with recent changes to the management of other islands within Sydney Harbour, including the NSW government awarding a tender for a hospitality venue to operate on Fort Denison and the Sydney Harbour Federation Trust expanding public access and commercial activity on Cockatoo Island.

Property Council of Australia policy executive Matthew Kandelaars said hospitality and premium tourism were the most plausible commercial options for Spectacle Island, given constraints including water-only access and strict heritage controls.

Resort Brokers director Tim Crooks said the island could attract interest from high-net-worth individuals, investors or hospitality groups, with its value potentially reaching tens of millions of dollars depending on permitted uses.

“The sale of an island in Sydney Harbour is an incredibly rare proposition and it will generate a lot of interest, particularly among buyers looking at adaptive reuse options, such as luxury accommodation, events or destination hospitality,” Crooks said.

Defence audit documents describe many of the island’s structures as “significantly degraded” due to water ingress, lead paint and decades of limited maintenance.

The buildings are listed on the Commonwealth Heritage Register under the Environment Protection and Biodiversity Conservation Act, meaning any buyer would face strict conservation and environmental remediation requirements.

UNSW City Futures Research Centre professor Chris Pettit said that while housing had been discussed as an option for other defence sites, Spectacle Island was unlikely to play a meaningful role in easing the housing crisis due to its small size and limited transport access.

He said the island had significant international tourism appeal and suggested it would be better managed by a public authority or Aboriginal organisation rather than a private owner.

“The only other option is a multimillionaire buying it as a trophy asset for prestige, but that would not be an equitable use of what has long been a publicly owned site,” he said.

Heritage advocates have warned that private ownership could jeopardise the preservation of the island’s historic buildings and military artefacts, including gun turrets and ship bells.

David Michael, president of the Naval Historical Society, said preserving the island’s buildings would require significant investment. “It is Australia’s oldest naval explosives manufacturing and storage site,” he said.

Drummoyne state Liberal MP Stephanie Di Pasqua said the proposed sale had “come as a shock” to many in the community and called for the site to remain in public hands.

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