The National Institute of Statistics (INE) has published the second installment of the housing rental reference index (IRAV), the new indicator that will be used to calculate the price increases that are applied annually to rentals to update them for inflation. Until now these updates were made based on the CPI published two months before the review, but with the new year the replacement came into force.
In December the IRAV was 2.28%, five tenths below the inflation of that month. As already mentioned, it is the second installment of the IRAV, which for the month of November 2024 was 2.20%, two tenths below the inflation of that month. Thus, contracts that are renewed in January will rise below the CPI.
Precisely, the objective of this new mechanism, which is among the measures that came into force with the new Housing Law, is to avoid “disproportionate increases in the rent of rental contracts” – the text reads – in contexts of high inflation.
It must be clarified, however, that only rental contracts that will be updated from 2025 and that have been signed since the entry into force of the Housing Law, on May 25, 2023, will use the new index. From there, each month the data will be published again for successive contracts that are completing one year. Contracts prior to May 2023 will continue to review their income based on the general value of the CPI.
Until the IRAV was created, and in the midst of the inflationary crisis derived from the war in Ukraine, between April 2022 and December 31, 2023 the updates were capped at 2%, and in the last year they have been at 3% %. Of course, this cap became obsolete in July 2024, when the CPI was below 3% again.
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