Heat pumps increase your house price 4-7%

A paper published in Nature Energy in October 2020* states that houses with air-sourced heat pumps sell for between 4% and 7% more than comparable houses without heat pumps. This research was done on 450,000 houses across 23 states in the USA. For many houses this premium exceeds the cost of adding a heat pump.

If you are looking for a house with heat pumps this research suggests you should do the opposite and look for a house without heat pumps and add one yourself because the house price premium exceeds the installed cost. This is true if you are paying the full cost of the heat pump, not just the incremental cost of the heat pump compared to replacing the AC unit. 

The authors put this seemingly  irrational behavior down to people not understanding heat pumps, plus the hassle of searching for one and installing it. 

This work on house price increases caused by reducing utility bills by using heat pumps is 100% consistent with prior work showing the house price increases by $20 for every $1 cut in utility bills. 20:1 implies a discount rate of 5% is being applied to the additional cash flow generated by the lower utility bills. 5% was the after-tax mortgage interest rate when these studies were done in the 1990s. The 4-7% house price increase observed with heat pump adoption implies an after-tax mortgage interest rate of 2.4% – almost exactly what it was in 2016 to 2018 when these heat pump studies were done. It turns out consumers are extremely rational when it comes to paying higher house prices in return for lower utility bills, whether the lower bills come from solar panels, heat pumps or just insulation. 

*Estimation of Change in House Sales Prices in the United States After Heat Pump AdoptionNature Energy October 2020, Shen et al.