Albany was established as a penal colony. The coastline had been sighted by Europeans as early as 1627 when Pieter Nuyts had sailed across the Great Australian Bight in the ship Gulden Zeepaardt. Nuyts' report of the land was such that the Dutch showed no interest in settlement. It was on the basis of the maps drawn by Nuyts that Jonathan Swift, when writing Gulliver's Travels, located the land of the Houyhnhnms almost exactly at the present site of Albany. With some kind of extraordinary vision Swift had Gulliver land on the coastline, eat oysters and be chased by Aborigines. He could not have known that George Vancouver, 65 years later, would enter one of the bays of King George Sound and name it Oyster Harbour because of the abundance of oysters he found in the area.
The second European to visit the area was George Vancouver who entered King George Sound in 1791. Vancouver spent two weeks in the area during which time he named Bald Head, Breaksea Island, Michaelmas Island, Oyster Harbour, Seal Island, took possession of the area at Point Possession and declared 'This port, the first which we had discovered, I honoured with the name of King George the Third's Sound, and this day being the anniversary of Her Royal Highness Princess Charlotte Augusta Matilda's birth, the harbour behind point Possession I called Princess Royal Harbour.'
Vancouver's report on the area was not good. He suggested that the soil was poor and the local Aborigines (he had not seen any of them) were extremely primitive.
The next explorer to visit the area was Matthew Flinders who arrived at King George Sound in July 1801 and he was followed by Nicholas Baudin who stopped in the sound on 11 February 1803 and stayed until 1 March noting the poor soils of the region but fascinated by the seemingly endless wildflowers. By the 1820s the area was being visited with some regularity by explorers and the whalers and sealers who worked in the Southern Ocean.
The turning point for Albany came on Christmas Day 1826 when the brig Amity entered King George Sound. The brig brought Major Edmund Lockyer and some troops and convicts. It had been decided some years earlier, partly to protect Australia against possible French settlement and partly because the British Government wanted to close the penal colony at Port Macquarie and open the surrounding area to free settlers, to establish Western Australia's first penal colony. Lockyer chose the site of present day Albany (a small stream ran into Princess Royal Harbour near where the replica of the Amity now stands) and it was officially proclaimed on 21 January 1827. At the time it was named Fredericks Town after Frederick Augustus, Duke of York and Albany, the second son of King George III.
Lockyer reported on the town site in April 1827. He made the observation that it was extremely difficult to sail from Sydney to Albany. He did however point out that, being the only deep water harbour on the south western coast it was very important strategically. Events overtook these limitations when, in 1829, a colony was established on the Swan River and its location, being superior to that of Albany, ensured its continuing existence and growing prosperity.
Albany' never did become a penal colony . It remained nothing more than a military outpost of New South Wales until on 7 March 1831 it was proclaimed as part of the Swan River Colony (the previous year a small group of explorers had travelled overland from Perth to Albany) and later that year the town was surveyed and blocks of land were sold to free settlers. Any prisoners who had not completed their sentences were returned to New South Wales. The following year the name was changed to Albany. By 1836 maps of the town showed York Street running down to the harbour and Stirling Terrace sweeping along the harbour foreshore.
Perhaps the most fascinating of all Albany's early visitors was Edward John Eyre who, with his Aboriginal companion Wylie, arrived in the town on 7 July 1841 and stayed for a week at Skerrats Family Hotel on the corner of Stirling Terrace and York Street. There can be few more potent historical experiences than to stand on the corner and imagine Eyre, having just walked from South Australia across the Nullarbor Plain, standing on the corner of the tiny town 150 years ago.
Eyre was hugely impressed by the warmth of greeting which the friends and relatives of Wylie gave the Aboriginal guide upon his arrival in Albany.