How To Calculate The CPI that I Must Apply To My Tenant In A Rented Flat In Barcelona?

Calculating the CPI (Consumer Price Index) works as a guide that helps to know the state of the price of goods and services that we consume on a daily basis. Its variation can be reflected in the price of rent. We will explain what this index is about and how you can calculate its impact on your rents.

What is the CPI and how is it calculated?

The CPI is the Consumer Price Index. It is the formula used to measure the state and behaviour of the prices of all goods and services that society consumes. Its main function is to inform consumers whether the products that we buy and that cover our daily needs have increased or decreased in price. In this sense, we can say that it is the indicator most commonly used to measure inflation in the country. In order to estimate the CPI, two variables need to be taken into account:

The shopping basket for the year being calculated: this includes all goods and services consumed by a household on a regular basis.
The data of the previous base year.

Calculating the CPI is a complicated procedure and knowing which items to measure is often confusing. For example, according to BBVA, “in 2012, new items such as portable hard drives, ‘notebooks’, ‘tablets’, photoepilation, laser hair removal or speech therapist entered the shopping cart, while others they disappeared because their use ceased to be significant, such as recordable CDs or movie rentals”. The evolution of the mechanism that measures these items is interesting. It was always the Household Budget Survey (HBS) that determined the importance (or not) of an item in the household basket. Today it is the commercial establishments themselves. One example is El Corte Inglés, which has announced the signing of an agreement with the INE (National Statistics Institute) to collect the CPI data so that the latter does not have to visit the shops. A mathematical formula is used to calculate the CPI: the Chained Laspeyres. A mathematical operation must be performed. First, the new prices are multiplied by the quantities consumed, and then divided in the same operation, but with the previous year’s data. There are more than 400 household consumption items in the list of items used to calculate the CPI. They are divided into 12 different groups:

food and non-alcoholic beverages
transport
housing
hotels, restaurants and cafés
leisure and culture
clothing and footwear
household goods
medicines
communications
alcoholic beverages and tobacco
education
other

How does it affect the price of the rent, and is it compulsory to apply the CPI and indicate it in the contract?

Why is the CPI so important when it comes to the rental price? Because the value of the rent is updated annually based on the variations of this index. Often, cost of living prices go up, and you don’t even know about it. Worse still, it can happen that there is an increase and your tenant has to pay a difference and you are not charging it to him. You can use this calculator to help you out of your doubts. The National Institute of Statistics helps you with a tool that in one simple step gives you the right percentage adjustment. If there is in fact a difference, it will – in principle – only be enforceable if the adjustment clause is in the contract. If it is not in the lease document, the adjustment cannot be made. But why in principle? Because the mechanism for adjusting rental prices, based on the variation of the CPI, has been subject to many legislative amendments in recent years. So we have to consider issues particular to each case. Read on and we will explain a little more.

Special considerations when applying the CPI to rental income

Firstly. It is necessary to take into account when the contract was signed. If it was signed before 31st March 2015, the owner/landlord has the right to increase annually the amount of the CPI. If, on the other hand, it was signed after that date, it can only be adjusted if this is stated in the contract.

Secondly. The rent is updated every time the contract expires. A common misconception is that the rent is always updated in January. In this way, contracts that came into force in January of the previous year will be updated in January.

Thirdly. It is necessary that the landlord communicates the update. Until this happens, the tenant is not obliged to pay more rent. If the landlord takes a few months to ask for it, the tenant continues to pay the same during this period. He only applies the new price once he has been informed of the increase.

Fourth. The INE publishes an advanced CPI indicator, which helps to predict the final CPI movements.

On 29th November 2021, the statistics institute issued a press release in which it announced the following: We hope we have clarified what CPI is, how to calculate it and its influence on the rent. Don’t hesitate to contact us if you have any further questions. If you are looking to sell or rent your property in Sant Cugat, we are happy to help you if you need the advice of professional real estate specialists. Remember that you can also leave us your messages and opinions in the comments section.

The estimated annual CPI inflation in November 2021 is 5.6%, according to the leading indicator prepared by the INE.
This shows an increase of two tenths in its annual rate. What does this mean? That the advance figure of 5.6% for November would be the highest CPI rate since September 1992.
What were the items that rose? Food prices, fuel and lubricants for personal vehicles.
The estimated annual rate of change of core inflation increased by three tenths of a percentage point to 1.7%, which is almost four points below that of the overall CPI.

We hope we have clarified what CPI is, how to calculate it and its influence on the rent. Don’t hesitate to contact us if you have any further questions. If you are looking to sell or rent your property in Sant Cugat, we are happy to help you if you need the advice of professional real estate specialists. Remember that you can also leave us your messages and opinions in the comments section.

The estimated annual CPI inflation in November 2021 is 5.6%, according to the leading indicator prepared by the INE.
This shows an increase of two tenths in its annual rate. What does this mean? That the advance figure of 5.6% for November would be the highest CPI rate since September 1992.
What were the items that rose? Food prices, fuel and lubricants for personal vehicles.
The estimated annual rate of change of core inflation increased by three tenths of a percentage point to 1.7%, which is almost four points below that of the overall CPI.