The 162-hectare Highercombe estate was settled by George Anstey in 1841, who named it after his original family home near Dulverton, Somerset. The present-day Highercombe golf course south of the townsite was part of this estate. In 1857, the house, now with sixteen rooms, and estate was purchased by George Marsden Waterhouse, who became Premier of South Australia in 1861. In 1929, it was burnt in a fire, but was rebuilt on a smaller scale.
The townsite itself was also settled in 1841, by land agent and auctioneer John Richardson. During the 1840s, it was the hub of the district and gained a simple stone Union Chapel serving several denominations, the Travellers' Rest Hotel, blacksmith, school, dwellings and other trappings of civilisation, together with a reserve which is now Houghton Common.