Australia Air Source Heat Pump Market By Technology (Air to Air (Ducts, Ductless), Air to Water (Split, Integrated)), By End Use (Residential, Hotels & Resorts, Gym & Spas, Education, Food Service, Others), By Distribution Channel (Online, Offline), By Region, Competition, Forecast & Opportunities, 2020-2030F

Market Overview

The Australia Air Source Heat Pump Market was valued at USD 872.23 Million in 2024 and is expected to reach USD 1409.92 Million by 2030 with a CAGR of 8.43% during the forecast period. The Australia air source heat pump market is anticipated to register an impressive CAGR during the forecast period. In Australia, heat pumps are commonly used in applications for space heating/cooling and hot water systems because Australia's climate varies significantly throughout the country. They can be utilized in residential and commercial sectors for space heating. Heat pump hot water systems are used for bathing and sanitation, thus driving the market's growth. As of 2024, the cumulative installation data of Clean Energy Regulator (CER) devices in Australia highlights a clear dominance of Small Generation Units (S.G.U. – solar), with a total of 3,578,413 systems installed. This category has experienced the most significant growth over the years. Following this, Solar Hot Water (SHW) systems reached a cumulative total of 621,914 installations. Meanwhile, Air Source Heat Pumps (ASHP) have also gained traction, achieving 501,085 cumulative installations by 2024. Although the ASHP category remains behind the other two in total numbers, it has shown a noticeable acceleration in adoption in recent years, particularly after 2020. This reflects a growing interest in energy-efficient heating solutions as Australia continues to transition towards more sustainable residential energy systems.

Key Market Drivers

Government Incentives and Policy Support

One of the most influential drivers of the Australia air source heat pump market is the strong backing from government initiatives. In a bid to meet national and international climate targets, both federal and state governments are offering incentives to encourage the adoption of low-emission technologies like air source heat pumps (ASHPs). Programs such as the Victorian Energy Upgrades (VEU) and various rebates from Clean Energy Regulator initiatives support residential and commercial consumers in replacing older, inefficient systems with environmentally friendly alternatives. These incentives significantly lower the upfront cost of purchasing and installing ASHPs, making them more financially accessible to the general population. This has led to a marked increase in adoption, especially in regions where the cost of electricity is high and residents are actively seeking energy-efficient heating and cooling solutions. Moreover, regulatory frameworks that phase out gas heating systems in favor of electric alternatives further accelerate this transition. By promoting long-term cost savings and carbon reductions, government policy has created an environment in which ASHPs are not only viable but increasingly preferred.

Rising Energy Costs and Consumer Demand for Efficiency

Australia has experienced fluctuating energy prices, with electricity and gas costs increasing in many regions. This has made energy-efficient solutions like air source heat pumps highly attractive to cost-conscious consumers. ASHPs are capable of delivering up to three to four times more heating energy than the electrical energy they consume, making them one of the most energy-efficient HVAC systems available today. Consumers are becoming more aware of these efficiencies and are seeking alternatives to traditional heating systems, such as electric resistance heaters or gas furnaces, which are not only costly to run but also less sustainable. The desire to reduce household energy bills while maintaining indoor comfort year-round is driving more Australians to consider ASHPs. In addition, businesses are also turning to these systems to reduce operating costs and meet internal sustainability goals. The trend toward electrification in the energy sector further supports this movement. As more homes integrate solar panels and battery storage, the ability to power heat pumps with renewable energy becomes an additional advantage, driving even more demand for this technology.

Environmental Awareness and Decarbonization Goals

The growing emphasis on environmental sustainability and climate change mitigation is another significant driver of the air source heat pump market in Australia. The country is progressively moving toward a net-zero carbon future, and air source heat pumps play a critical role in this shift due to their low greenhouse gas emissions. Traditional heating methods, especially those powered by fossil fuels like natural gas, contribute significantly to carbon emissions. In contrast, ASHPs use electricity and operate with high efficiency, resulting in much lower environmental impact. When paired with renewable energy sources like rooftop solar, their emissions can be almost entirely eliminated. This aligns well with Australia’s national decarbonization strategy and international climate commitments, such as those under the Paris Agreement. The public is increasingly aware of their carbon footprint, and this awareness has shifted consumer behavior. There is a growing market segment that values sustainable living and is willing to invest in technologies that align with these values. Furthermore, developers and architects are now factoring in sustainable technologies like ASHPs in building design, particularly in new residential developments and green buildings. This alignment of environmental goals with market demand makes ASHPs a natural solution for sustainable heating and cooling in modern Australian homes and businesses. 

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Key Market Challenges

High Upfront Costs and Installation Barriers

Despite long-term energy savings, the initial cost of purchasing and installing air source heat pumps (ASHPs) remains a major hurdle for many Australian consumers. Even with government rebates and incentives, the price tag for ASHP units, installation, and potential electrical upgrades can deter households and small businesses. This is particularly true in low-income areas, where budget constraints outweigh future savings. Additionally, installation costs may vary depending on home size, building type, and the need for retrofitting older systems, all of which can increase the overall investment required. This challenge is compounded by a lack of standardization in installation practices and price transparency, making it difficult for consumers to assess value. Without more accessible financing options, such as zero-interest loans or broader subsidy coverage, the high upfront cost continues to limit market penetration.

Limited Consumer Awareness and Technical Understanding

Many Australian consumers are still unfamiliar with the benefits and functioning of ASHP technology. Compared to more traditional heating systems, heat pumps are less understood, and myths around their performance in colder temperatures or reliability often persist. This lack of awareness hinders market growth, as potential users may opt for familiar systems over a technology they perceive as complex or unproven. Furthermore, there is often confusion about government rebates and how to access them, which discourages adoption. Increasing consumer education through marketing campaigns, installer training, and clearer policy communication is essential to overcoming this challenge and encouraging wider acceptance of heat pumps across diverse demographic groups.

Shortage of Skilled Installers and After-Sales Support

Another pressing challenge is the shortage of qualified professionals trained to install and maintain air source heat pump systems. As demand grows, the supply of skilled labor has not kept pace, particularly in regional and remote areas of Australia. This skills gap can lead to inconsistent installation quality, reduced system performance, and higher maintenance issues. It can also delay adoption if customers face long wait times or limited service availability. Additionally, after-sales support remains a concern, with limited availability of technicians for troubleshooting or warranty services. To ensure sustainable growth, the industry must invest in workforce development programs, certification standards, and improved technical support infrastructure.

Key Market Trends

Integration with Renewable Energy Systems

A significant trend in the Australia air source heat pump market is the integration of these systems with renewable energy sources, particularly solar photovoltaic (PV) panels. This synergy allows homeowners to utilize solar-generated electricity to power their heat pumps, enhancing energy efficiency and reducing reliance on the grid. The combination of ASHPs with solar PV systems not only lowers operational costs but also contributes to a reduction in greenhouse gas emissions. Government incentives and rebates further encourage this integration, making it an attractive option for environmentally conscious consumers. As Australia continues to invest in renewable energy infrastructure, the adoption of ASHPs in conjunction with solar energy is expected to rise, promoting sustainable heating and cooling solutions across the country.​

Technological Advancements and Smart Features

Technological innovation is driving the evolution of ASHPs in Australia. Modern heat pumps are increasingly equipped with smart features, such as Wi-Fi connectivity and integration with home automation systems, allowing users to control and monitor their heating and cooling remotely. Advancements in inverter technology and the use of environmentally friendly refrigerants have improved the efficiency and performance of ASHPs, even in varying climatic conditions. These technological enhancements not only provide greater comfort and convenience for users but also contribute to energy savings and reduced environmental impact. As consumers become more tech-savvy and demand energy-efficient solutions, manufacturers are focusing on developing ASHPs that align with these expectations, leading to increased adoption in the residential and commercial sectors.​

Shift Towards Low Global Warming Potential (GWP) Refrigerants

Environmental concerns are influencing the choice of refrigerants used in ASHPs. There is a growing shift towards refrigerants with low Global Warming Potential (GWP), such as R-32 and R-290, to minimize the environmental impact of heating and cooling systems. This transition is in line with Australia's commitment to reducing greenhouse gas emissions and phasing down the use of high-GWP substances under international agreements. Manufacturers are responding by designing ASHPs compatible with these eco-friendly refrigerants, ensuring compliance with regulations and meeting consumer demand for sustainable products. The adoption of low-GWP refrigerants in ASHPs not only supports environmental objectives but also positions the Australian market as a leader in sustainable heating and cooling technologies.  

Segmental Insights

Technology Insights

In the Australia Air Source Heat Pump Market, Air to Water technology emerged as the dominating segment. This dominance is largely attributed to its ability to provide both space heating and hot water, making it highly suitable for residential and commercial applications. Within this segment, split systems are particularly popular due to their flexibility in installation, better energy efficiency, and superior performance in varying climatic conditions. Air to Water heat pumps are favored in regions aiming to reduce reliance on traditional gas heating and are often integrated with underfloor heating or radiator systems, enhancing their utility. Their compatibility with renewable energy sources like solar PV systems further strengthens their appeal in a market increasingly focused on sustainability and energy efficiency. By contrast, while Air to Air systems are also growing, especially ductless models for retrofits or smaller spaces, they are generally more limited to space conditioning and do not offer the dual benefit of water heating. As a result, Air to Water systems, especially split-type units, continue to lead the market due to their versatility, energy savings, and support from government incentives aimed at promoting high-efficiency, low-emission technologies. 

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Regional Insights

Queensland holds a prominent position in the Australia air source heat pump market due to a combination of favorable climate conditions, government incentives, and growing awareness of energy-efficient technologies. The state’s warm climate makes air source heat pumps particularly effective, as they operate more efficiently in milder weather. This contributes to their growing popularity among homeowners seeking sustainable and cost-effective heating and cooling solutions. Additionally, Queensland has seen a steady increase in residential and commercial construction, especially in urban centers like Brisbane and the Gold Coast, which has further driven demand for modern HVAC systems such as air source heat pumps. Government-backed programs in Queensland have also played a significant role in supporting the adoption of environmentally friendly appliances. These initiatives often include rebates and energy-efficiency schemes aimed at reducing emissions and encouraging consumers to switch from traditional systems to greener alternatives. Furthermore, the state's commitment to clean energy transitions aligns well with the use of heat pumps, especially when integrated with solar PV systems, which are increasingly common in Queensland homes. The combination of favorable environmental conditions, economic incentives, and growing environmental consciousness places Queensland at the forefront of air source heat pump adoption in Australia, positioning it as a leader in sustainable residential and commercial climate control solutions.

Recent Developments

• In 2025, ​Panasonic Australia and Reclaim Energy have partnered to introduce a CO₂ hot water heat pump solution to the Australian market, aiming to provide an energy-efficient and environmentally friendly alternative to traditional gas and electric water heating systems. This collaboration combines Panasonic's advanced CO₂ heat pump technology with Reclaim Energy's expertise in hot water system design, resulting in a product that is suitable for both residential and commercial applications.
• In 2022, PHNIX has introduced its R290 Everest Series air-to-water heat pump to the Australian market, marking a significant advancement in eco-friendly heating solutions. This innovative system boasts an A+++ energy efficiency rating and a Seasonal Coefficient of Performance (SCOP) exceeding 5.0, ensuring optimal performance year-round. Designed with ultra-silent operation in mind, it maintains noise levels below 40 dB(A) at a 1-meter distance, thanks to advanced soundproofing materials and an optimized fan motor.

Key Market Players

• Stiebel Eltron (Aust) Pty Ltd
• Daikin Australia Pty Ltd
• Rheem Australia Pty Ltd
• Aquamax Australia Pty. Limited
• Robert Bosch (Australia) Pty Ltd
• Evo Industries Australia Pty Ltd.
• Smart Lifestyle Australia Pty Ltd
• Rinnai Australia Pty Ltd
• Solargain Pty Ltd (iStore)
• Mitsubishi Electric Australia Pty Ltd.

Report Scope:

In this report, the Australia Air Source Heat Pump Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Australia Air Source Heat Pump Market, By Technology:

o   Air to Air (Ducts, Ductless)

o   Air to Water (Split, Integrated)

• Australia Air Source Heat Pump Market, By End Use:

o   Residential

o   Hotels & Resorts

o   Gym & Spas

o   Education

o   Food Service

o   Others

• Australia Air Source Heat Pump Market, By Distribution Channel:

o   Online

o   Offline

• Australia Air Source Heat Pump Market, By Region:

o   New South Wales

o   Victoria

o   Queensland

o   South Australia

o   Western Australia

o   Tasmania

o   Northern Territory

Competitive Landscape

Company Profiles: Detailed analysis of the major companies presents in the Australia Air Source Heat Pump Market.

Available Customizations:

Australia Air Source Heat Pump Market report with the given market data, TechSci Research offers customizations according to a company's specific needs. The following customization options are available for the report:

Company Information

• Detailed analysis and profiling of additional market players (up to five).