Approximately 154 million homes in Europe and North America will be equipped with smart technology by 2021, according to M2M Research Services.

Smart homes and home automation are ambiguous terms used in reference to a wide range of solutions for controlling, monitoring and automating functions in the home. Berg Insight's definition of a smart home system requires that it has a smartphone app or a web portal as a user interface.

Devices that only can be controlled with switches, timers, sensors and remote controls are thus not included in the scope of this study. Smart home systems can be grouped into six primary categories: energy management and climate control systems; security and access control systems; lighting, window and appliance control systems; home appliances; audio-visual and entertainment systems; and healthcare and assisted living systems.

North America recorded strong growth in the smart home market during 2016. The installed base of smart home systems in the region increased by 58 percent to reach 31.2 million at the year-end. An estimated 5.4 million of these were multifunction or whole-home systems whereas 25.8 million were point solutions designed for one specific function. As some homes have more than one smart system in use, the installed base totaled an estimated 21.8 million smart homes at the end of the year.

This corresponds to 16.7% of all households, placing North America as the most advanced smart home market in the world. Between 2016 and 2021, the number of households that have adopted smart home systems is forecasted to grow at a compound annual growth rate (CAGR) of 27%, resulting in 73.0 million smart homes. Market revenues reached $9.9 billion in 2016, an increase of 33 percent year-on-year. The market is expected to grow at a CAGR of 22% between 2016 and 2021, reaching $27.2 billionin yearly revenues at the end of the forecast period.

The European market for smart home systems is still in an early stage and a few years behind North America in terms of penetration and market maturity. At the end of 2016, there were a total of 10.9 million smart home systems in use in the EU28+2 countries, up from 6.1 million in the previous year.

Around 1.4 million of these systems were multifunction or whole-home systems whereas 9.5 million were point solutions. This corresponds to around 8.5 million smart homes when overlaps are taken into account, meaning that 3.8 percent of all households in the region were smart at the end of the year.

The number of European households that have adopted smart home systems is forecasted to grow at a compound annual growth rate (CAGR) of 57% during the next five years, resulting in 80.6 million smart homes by 2021. Market revenues grew by 69% to $3 billion in 2016. The market is forecasted to grow at a CAGR of 49% between 2016 and 2021 to reach $22 billion) at the end of the forecast period.

A point solution will in most cases constitute the consumer's first smart home purchase. Compared to whole-home systems, point solutions generated 62 percent of the combined market revenues in North America and Europe. The most successful point solutions to date include smart thermostats, security systems, smart light bulbs, network cameras and multi-room audio systems.