What does the new index for rent increases involve?
To say that Spain’s rental market is booming is to state the obvious. The percentage of Spaniards living in rented accommodation has been increasing steadily for several years now, and rental has become a key component of the industry’s future.
In this context, a number of adjustments have to be made to meet the new demands, one of the most significant being the introduction of a new index for rent increases. Beginning in 2025, the National Statistics Institute (INE) will be using a new methodology for calculating rent increases, based on the Rental Price Reference Index (IRAV).
This represents a significant change in the Spanish rental market, so let’s see how it works and the impact it will have.
How does the new reference index work and what factors does it include?
From 2025, rental prices will be increased in line with the IRAV, calculated as the lowest of:
- the annual rate of change of the Consumer Price Index (CPI),
- the annual rate of change of underlying inflation, and
- an adjusted average annual rate of change.
Previously, rent rises were tied to the CPI. Then, in 2022, the CPI surged due to rising energy costs. This prompted discussion about the need for a different, more stable indicator for housing that would not be so closely linked to general consumer prices.
The new index is now available on the INE website and will be updated monthly to reflect the value from the previous month. For instance, the January update, already published, shows the figure for December 2024, which is 2.28%.
What impact will it have on tenants and landlords?
It is important to note that not all existing rental contracts will be affected by the change. The new index will apply only to contracts signed after the new Housing Law came into force on 25 May 2023. Contracts signed before that date will continue to be updated on the terms agreed by the parties.
The impact will therefore be limited to more recent contracts, where rent increases will be governed by this new index.
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