Ultimate trophy property: The Sydney Harbour island up for sale

The federal government has announced plans to sell Spectacle Island, a small but historically significant parcel of land in Sydney Harbour, as part of a broader $1.8 billion divestment program covering 67 surplus Defence sites nationwide.

Located near Drummoyne on the Parramatta River, the island has been vacant since 2023 after the Navy Heritage Collection was relocated to Banksmeadow. Established in 1865 as a gunpowder storage facility, the island retains a number of heritage-listed buildings and sits within the Sydney Harbour National Park, factors that will heavily influence any future redevelopment.

Ownership of the sites will be transferred to the Department of Finance, which will lead a consultation process to determine the most appropriate buyers. While some Defence sites are expected to be acquired by state governments for housing or infrastructure, others may be offered to private developers depending on planning controls and zoning changes.

Spectacle Island presents a rare opportunity, with no comparable private island sale in Sydney Harbour in recent history. Industry observers suggest potential uses could include boutique hospitality, events-based tourism, or adaptive reuse of the heritage structures, subject to strict conservation and planning approvals. Any purchaser would also need to address restoration works, as several buildings have deteriorated following years of limited operational use and high maintenance costs.

The sale forms part of a broader Defence property rationalisation that includes several notable holdings across Australia, including sites in Mosman, Paddington, Melbourne and Brisbane. For Sydney’s property market, however, Spectacle Island stands out as a unique offering — a once-in-a-generation chance to acquire a heritage island in one of the world’s most tightly held harbour locations.