If you're buying a property in Canberra, you're not actually purchasing the land, instead you're buying into a 99-year Crown lease.

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Jon Wyatt lives in Melbourne and started to wonder about 99-year leases after striking up a conversation with a passenger on a flight from Canberra to Melbourne.

His fellow passenger worked in the ACT but bought in NSW just to have the title on his home.

"Coming from Victoria, from Melbourne, I think there'd be a revolution or a riot down here if people were forced to lease," Jon said.

He asked Curious Canberra: Can people in Canberra own land or do all homeowners lease their blocks?

It might come as a surprise to learn that all land in the ACT is leasehold, not freehold.

We have to delve into the history of the Territory to find the origins of this uniquely Canberran system.

Capital gains the reason... a century ago

The wife of the Governor-General, Lady Denman officially names the new federal capital in 1913. ( Supplied: NFSA )

The origins of the 99-year lease go back more than a century, to pre-Federation times.

When Lady Denman announced the name of the new capital in 1913, the assembled politicians had already put in place a leasehold system for the ACT.

To find out how the system came about, I sought out prominent local barrister Chris Erskine S.C. He has an interest in the history of the city and has written about the Territory's 99-year leases.

Chris pointed me in the direction of a once influential American.

American social philosopher Henry George at age 26, 1865.

Canberra's leasehold system was based on a bold social experiment that originated with Henry George, an American social philosopher of the late 1800s.

In the late 19th Century, politicians from all persuasions listened to what he had to say.

George's central idea was that as a city develops the value of its land goes up.

He asked whether it was reasonable for the landholder to claim the increased value of the land, the "unearned increment", when the landholder in most cases hadn't done anything to cause the increase in value.

In a modern context George was talking about capital gain on a property, an issue that vexes our modern day politicians and even became part of the most recent Federal Election campaign.

In 1901, Australia's first Prime Minister Edmund Barton said of the yet to be chosen capital:

"We shall be able to get the land on fair terms, lease it on fair terms and still make a profit for the Commonwealth."

Paying for Canberra

A poster from 1924 advertises the sale of leases in the suburb of Blandfordia, now known as Forrest. ( Supplied: The National Library of Australia catalogue )

Chris Erskine said land for the Capital was first bought from NSW landholders who owned it freehold.

"One of the things about Federation was that they wanted a new capital that wasn't Sydney and wasn't Melbourne and we all know about that," he said.

"Somehow or other they had to pay for it and this seemed like the easy solution, which is you set up a brand new city and you cream off the capital gain and with that you pay for developing new parts of the city, you pay for all its great buildings and so forth."

The income stream was to come from the rent paid by leaseholders, first set at 5 per cent of the unimproved value. Leases started to be sold for small amounts in the early 1920s.

"So if you wanted to buy a house block in the 1920s you would be buying a Crown lease for 99 years," Chris said.

The rent paid on each lease was meant to build Canberra. But it didn't work out that way.

Valuations were only done every 20 years, so the rent paid didn't keep track with the capital gains. And speculators were allowed to buy land, driving up prices.

By the 1970s there was no difference in the value of a leasehold property in the ACT and the equivalent freehold property in neighbouring NSW.

Chris Erskine said the then Prime Minister John Gorton sensed a political opportunity and abolished the land rent paid on leases.

"He had the idea that it might persuade the voters of Canberra to vote in the Coalition in a by-election, and we didn't."

What happens when the leases expire?

Canberra homeowners no longer pay rent on their leased blocks. ( ABC News: Narda Gilmore )

The first 99-year leases granted will expire in 2023. It's almost universally assumed that the Government will simply roll over those leases for another 99 years.

Chris Erskine said that's likely but not confirmed.

"Nobody thinks that the Government is going to ask for the blocks back, so we assume that all of these leases are going to be extended but right now nobody actually knows," he said.

The leasehold and freehold systems are almost identical in operation, prompting Chris to ask why they're still kept.

"It's not immediately clear why we need Crown leases anymore and there has been discussion about this in the last 20 years but I suppose the most that you can say is that it's inertia, it's the way things are and if it ain't broke don't fix it."

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