As of January 1, 2025, Spain has implemented a new mechanism that limits the annual increase in rental prices. Whether you rent or let a property, this directly affects your wallet. In this article, you’ll learn what the new rental index is, how it is calculated, and what changes it brings for tenants and landlords.
Why was a new rental index introduced?
The sharp rise in rental prices in recent years raised concerns among policymakers. To protect tenants from disproportionate rent hikes, the Housing Law (Ley 12/2023) was passed in May 2023, setting limits on annual rent indexation. The new reference index was officially approved by Spain’s National Statistics Institute (INE) on December 18, 2024.
What is different as of January 1, 2025?
Until 2025, annual rent adjustments were based on the Consumer Price Index (CPI). This meant that rent increases could follow inflation, even if it was volatile.
From the beginning of 2025, a new rent renewal index applies, which limits rent growth by selecting the lowest value of the three indexes:
- Annualized rate of change in the CPI.
- Annualized rate of change in the underlying CPI (excludes fluctuations in energy prices and volatile products).
- Specifically calculated adjusted annualized adjusted average annualized rate (TVAMAmt).
How is the adjusted TVAMAmt rate calculated?
This indicator takes into account:
- CPI and Core CPI.
- The difference between their annual growth rates.
- Two special parameters:
- Alpha (0.5): smooths differences between indices.
- Beta (2): reflects the inflation target set by the European Central Bank (ECB).
Thus, even if inflation rises high, the new index limits annual rent increases while maintaining a balance of interests.
When and where is the index published?
The National Institute of Statistics (INE) started publishing the value of the new index every month, starting from January 2, 2025, on its official website. The publications are released on the same dates as the CPI data release calendar.
What does this mean for tenants?
You have more protection against rent hikes. The landlord can no longer automatically raise rents by 7-8% in line with inflation. The new index acts as a cap (“ceiling”) tied to the most stable economic indicators.
What does this mean for landlords?
While rental yields may now grow more slowly, the new index provides predictability and stability, which is especially important for long-term leases. It can also reduce tenant turnover and make income planning easier.
Conclusion
The new rental index is an important reform to stabilize the housing market in Spain. It helps to curb excessive price increases and ensures transparency and fairness for both parties to the contract.
📌 We advise you to regularly check the official INE data and read the full text of the Law on the Right to Housing (Ley 12/2023) to keep up to date with all the details.
