Residential Heat Pumps Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, Segmented By Type (Air Source, Water Source, Geothermal (Ground) Source), By Capacity (Up To 10 kW, 10 To 20 kW), By Region, Competition 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 54.26 Billion
CAGR (2026-2031)	8.01%
Fastest Growing Segment	10 To 20 kW
Largest Market	Asia Pacific
Market Size (2031)	USD 86.15 Billion

Market Overview

The Global Residential Heat Pumps Market will grow from USD 54.26 Billion in 2025 to USD 86.15 Billion by 2031 at a 8.01% CAGR. Residential heat pumps are advanced thermal management systems designed to provide space heating, cooling, and water heating by transferring thermal energy rather than generating it through combustion. The primary drivers propelling market growth include stringent global decarbonization mandates and a structural shift toward building electrification to mitigate carbon emissions. Furthermore, government financial incentives and regulatory frameworks favoring energy-efficient infrastructure are accelerating the replacement of traditional fossil-fuel systems. According to the Air-Conditioning, Heating, and Refrigeration Institute, in 2024, total United States shipments of air-source heat pumps reached 4.12 million units, reflecting a 14.0 percent increase compared to the previous year.

Despite these positive drivers, the market faces a significant impediment regarding the substantial upfront capital investment required for equipment and retrofit installation. This cost premium, relative to conventional gas or oil boilers, often deters adoption among price-sensitive consumers, particularly in the absence of comprehensive subsidy programs or accessible financing options. Consequently, the high initial expense remains a critical barrier to mass market penetration in lower-income demographics.

Key Market Drivers

Supportive regulatory frameworks and financial incentives are currently serving as the primary mechanisms to accelerate the adoption of residential heat pumps by offsetting high upfront costs. Governments globally are implementing aggressive subsidy programs, tax credits, and grant schemes to bridge the price gap between electric heat pumps and traditional fossil-fuel boilers. These fiscal interventions are critical for encouraging homeowners to transition to electrified heating systems, particularly in markets where gas prices have stabilized. For instance, according to the United Kingdom Department for Energy Security and Net Zero, September 2024, in the 'Boiler Upgrade Scheme statistics' report, the authority received 2,890 applications for heat pump grants in August 2024 alone, representing a 100 percent increase compared to the same month in the previous year.

Innovations in low-GWP refrigerants and cold-climate performance are simultaneously expanding the addressable market by resolving historical efficiency limitations in regions with severe winters. Manufacturers are rapidly commercializing systems capable of maintaining high thermal output without auxiliary resistance heating, even in sub-freezing temperatures, thereby validating the technology for broader geographic deployment. This technical progress was highlighted when, according to the U.S. Department of Energy, April 2024, in the 'Residential Cold Climate Heat Pump Challenge' announcement, prototypes from partner manufacturers successfully demonstrated the ability to deliver 100 percent heating capacity at 5 degrees Fahrenheit. Despite these advancements, market volume fluctuates based on regional policy stability; according to the European Heat Pump Association, in 2024, total heat pump sales across 21 European countries reached 3.02 million units during the preceding year, reflecting the sector's sensitivity to changing economic conditions.

Download Free Sample Report

Key Market Challenges

The substantial upfront capital investment required for equipment and installation constitutes a severe obstruction to the expansion of the global residential heat pump market. While operational savings are often achievable over time, the initial expenditure for a heat pump system is frequently significantly higher than that of replacing a conventional gas or oil boiler. This price disparity creates a high barrier to entry for price-sensitive households, particularly in regions where the cost of electricity remains high relative to fossil fuels. Consequently, the immediate economic calculation for homeowners often favors retaining legacy systems, thereby delaying the transition to electrified heating infrastructure.

This financial hurdle has visibly dampened market momentum in key regions, causing volatility in deployment rates. According to the European Heat Pump Association, in 2024, heat pump sales across 13 major European markets fell by 23 percent compared to the previous year, dropping to approximately 2 million units. This contraction underscores how economic pressures and the high relative cost of installation directly restrict mass adoption. The inability of lower-to-middle-income demographics to absorb these initial costs limits the market's addressable base, preventing the technology from achieving consistent, widespread penetration.

Key Market Trends

The proliferation of hybrid heat pump systems is rapidly emerging as a critical trend for decarbonizing existing building stocks where deep thermal retrofits are economically unfeasible. These dual-fuel units automatically switch between an electric heat pump and a legacy fossil-fuel boiler based on real-time efficiency and energy prices, offering a practical bridge for electrification in older properties without requiring radiator upgrades. This retrofit viability is driving significant segment expansion, particularly in markets with older infrastructure. According to the Heat Pump Association, January 2025, in the 'Record year for UK heat pump sales and training' announcement, the category encompassing integrated hybrid heat pump systems recorded a 100 percent growth rate in the United Kingdom during 2024.

Simultaneously, the coupling of heat pumps with residential solar PV and thermal energy storage is gaining traction as homeowners seek to maximize self-consumption and insulate themselves from volatile grid electricity prices. By integrating smart controls, these systems utilize on-site renewable generation to power thermal loads, effectively converting hot water tanks into thermal batteries that store excess solar energy for evening use. The economic advantage of this technological convergence is substantial in driving adoption. According to SolarPower Europe, December 2024, in the 'EU Market Outlook for Solar Power 2024-2028' report, households equipped with combined solar photovoltaic and heat pump systems achieved energy bill savings of up to 84 percent compared to those dependent on conventional gas heating.

Segmental Insights

The 10 to 20 kW capacity segment represents the fastest-growing category within the global residential heat pump market, driven largely by the accelerating demand for retrofitting existing single-family properties. Unlike smaller units suitable for new, highly insulated apartments, this capacity range provides the necessary thermal output to replace conventional gas and oil boilers in older residential infrastructure effectively. This shift is further supported by decarbonization mandates from institutions like the European Union, which incentivize the electrification of heating systems. Consequently, homeowners increasingly select this capacity tier to ensure adequate heating performance while adhering to evolving environmental regulations.

Regional Insights

Asia Pacific maintains a leading status in the global residential heat pumps market due to rapid urbanization and strong regulatory support for decarbonization. The region experiences high demand driven by government initiatives such as the Coal to Electricity policy in China which encourages replacing traditional boilers with electric alternatives. Additionally, the concentration of major manufacturers in Japan and China creates a robust supply chain that improves product availability. Rising consumer awareness regarding energy conservation and distinct climatic requirements for both heating and cooling further support this regional expansion.

Recent Developments

• In December 2024, Daikin Europe NV released a new range of air-to-water heat pumps specifically developed for single-family homes. The Altherma 4 H series operates using propane (R290) refrigerant and features outdoor units manufactured at the company's new facility in Lodz, Poland. These systems are available in capacities ranging from 6 kW to 14 kW and can supply hot water at temperatures up to 75°C. The heat pumps are engineered to function in ambient temperatures as low as -28°C, combining high performance with reduced sound levels to meet the needs of the European residential market.
• In October 2024, Bosch Home Comfort introduced the IDS Ultra, a cold-climate heat pump system designed to withstand extreme winter conditions. This product was the first solution from the Department of Energy’s Residential Cold Climate Heat Pump Challenge to commercially enter the market. The system utilizes advanced inverter drive technology to maintain 100% heating capacity at an outdoor temperature of 5°F and remains operational down to -13°F. By incorporating Enhanced Vapor Injection technology and meeting new refrigerant requirements, the unit provides a robust and energy-efficient heating option for residential buildings across various climate zones.
• In September 2024, Carrier announced the successful completion of the U.S. Department of Energy’s Cold Climate Heat Pump Challenge for residential applications. Following extensive field trials and laboratory testing, the company initiated production of its designated cold climate heat pumps at its manufacturing facility in Collierville, Tennessee. These innovative units are engineered to deliver 100% rated heating capacity at 5°F and operate reliably in temperatures as low as -23°F. This development marks a significant advancement in residential heating technology, offering homeowners a high-efficiency electric alternative that performs effectively in regions with harsh winter weather.
• In August 2024, LG Electronics launched two new versions of its Therma V R290 Monobloc residential air-to-water heat pump. These updated models utilize propane (R290) as a refrigerant, which supports compliance with environmental regulations due to its low global warming potential. The systems were designed to achieve a flow temperature of up to 75°C and can maintain 100% heating output even when outdoor temperatures drop to -15°C. With an operational range capable of functioning down to -28°C and a seasonal coefficient of performance exceeding 5, the new units aim to provide efficient heating solutions for residential properties in colder climates.

Key Market Players

• Alpex Pumps
• Aqua Group
• Bright Limited
• C.R.I. Pumps Private Limited
• Crompton
• LORENTZ
• Dankoff
• Duke Plasto Technique Private Limited
• EcoSoach
• Ecozen Solutions

By Type	By Capacity	By Region
Air Source Water Source Geothermal (Ground) Source	Up To 10 kW 10 To 20 kW	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Residential Heat Pumps Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Residential Heat Pumps Market, By Type:

• Air Source
• Water Source
• Geothermal (Ground) Source

• Residential Heat Pumps Market, By Capacity:

• Up To 10 kW
• 10 To 20 kW

• Residential Heat Pumps Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE