A few years ago, the United Kingdom announced that it would ban the sale of new diesel and petrol cars by 2040. France and other countries quickly followed suit. The drift from non-renewable energy has caused a flurry of investments in alternative energy sources, particularly lithium mines.
Over the past few years, Australia has kept lithium production and supply at par with Chile, slowly becoming the largest supplier of lithium in the world. Most of Australia’s lithium mines are concentrated in Western Australia, with only a single mine outside this region, near Darwin, Northern Territory.
The lithium production potential of Western Australia can be understood by the fact that the lithium mines from Greenbushes – a mining and timber town in Western Australia – alone accounted for over a fifth of the global lithium production in 2021.
The combined lithium output from Western Australia’s mines allowed the country to supply half of the global lithium in 2021. As per the Department of Mines, Industry Regulation, and Safety, Western Australia has 1,846 full-time employees in the mining industry, generating $938 million in sales value after selling 1,627,771 tonnes of lithium.
Considering these stats, a boom in lithium production from Western Australia can be assumed. So, how does this affect real estate in the region? Let’s take a look.
Typically, the regions around a mine are not the best place to live, especially around an open-cut mine. Therefore, real estate owners in close proximity to these mines are likely to face a decrease in property value.
In a study conducted in Mount Isa City, Queensland, the researchers found that smelting and mining activities lower the residential property prices in areas surrounding the mines. The main insight from this study was that people generally tend to avoid living in areas with high pollution.
Moreover, the water bodies around a mine are at risk of contamination from the run-off of metals, which can further reduce the value of a property. The risk of a spill during the transportation is another reason people avoid buying or renting properties near a mine.
The study found that people are willing to pay $13,947 more for every kilometer the property is farther from the mine.
A similar study was conducted to determine the impact of gold mines in Kalgoorlie, Western Australia, on residential properties. The researchers found that properties within two kilometers of the gold mine were sold at 20% to 30% lower prices than properties at least 6 to 7 kilometers away from the mine.
The decrease in price is not merely due to pollution and the risk of contamination. Since mines are made away from city centers, they’re not in proximity of local transportation, schools, offices, hospitals, or public open spaces.
Therefore, if a potential buyer is looking for all these amenities in the same area, they’ll have to pay much more or look elsewhere. In most cases, people choose the latter.
Mark Cully, the chief economist at the Department of Industry, Innovation, and Science, believes that lithium will bring in hundreds of billions of dollars for Perth. His estimates are not entirely based on speculations, considering the increasing investment of the Western Australian government in lithium production.
Zaki Ameer of buyers agency DDP Property Perth says that “Western Australia has announced several new mines recently, and none of these projects are small-scale. In fact, five of the largest mines in the region have a collective project value of $2.8 billion.
In 2019, the government launched a 10-year Sustainable Cities and Regions report in Perth to address urban problems like inflated housing markets, transport congestion, biodiversity loss, etc. The plan also involves making Perth the ‘Lithium Valley’ of the region.
Initiatives to accomplish this plan are already in play. The Western Australian government has set up a task force for its implementation, met with Tesla to discuss lithium supply for electric cars, and contributed millions to research funding.
If the government gets the Perth Lithium Valley plan right, Perth’s real estate prices could rise substantially. The plan is expected to bring in $56 billion and 93,000 new jobs by 2025. Many of these people will come to Perth from other parts of the country or the world.
Sure enough, they’ll need rentals or properties to live in, and the demand could surge. It is expected to create a ripple effect on Perth’s real estate market as prices naturally increase with the growing demand. Plus, it will create a tight market, where properties in the region could be sold at a premium.”
On top of that, the optimal distance between mines and Perth’s city center or residential regions means air pollution and contamination risk are not a concern for people relocating to the city. Perth already holds immense attraction in being more affordable than other capital cities in the country.
As more investment pours into the city, Perth’s economy will likely boom, bringing an influx of people, jobs, and money to the region.
Given the current economic situation of many parts of the world, this could be an excellent opportunity for Perth to attract more investment and further its progress.
Ameer says “With the world moving toward alternative energy sources, it shouldn’t come as a surprise that a region known for being at the forefront of this cause is getting so much traction from investors and the general population. “
While mining towns are no strangers to fluctuating real estate values, the recent initiatives by Western Australia’s government make Perth an attractive option for people looking at long-term investments in the city center or suburbs at a fair distance from lithium mines.
It’s too early to say how big of an impact the Lithium Valley plan will have on real estate pricing and investments. But if the government gets it right, it will be just what Western Australia needs to boost its economy and become the leading region for alternative energy sources.
Keeping that in mind, if you plan to invest in Perth’s real estate, some of the best suburbs include Wellard, Brabham, Hocking, Orelia, Joondalup, and Forrestfield.