Did Speculation in Land Pay Off for British Investors? Buying and Selecting Land in South Australia, 1835-1850

In 1834, Britain’s Parliament passed the South Australia Act establishing South Australia as a colony. By December 1835, 130 British investors purchased 437 priority land orders (PLO) at £81 per order; each PLO holder could select a one-acre surveyed lot in the capital city of Adelaide and a block of 80 acres of surveyed country land. In the morning of March 23, 1837, PLO investors participated in a lottery that randomized the order of selection of city lots; in the afternoon they selected 437 lots from 1,000 available lots. One week later, all remaining lots were sold sequentially by lot number at auction. We investigate whether initial PLO selectors choose the most valuable lots and whether investors who paid the highest prices at auction choose the most valuable of the remaining lots. We find that those who selected early and those who paid the highest prices at auction tended to choose lots that yielded higher market prices in 1838, 1839, 1849 and 1850 and higher assessed values in 1849. We also find that the annual rate of return on city lots sold in 1849/1850 averaged 17.37 percent, much higher than the average rate of return to British empire investment later in the nineteenth century.