Why Spain's INE excludes housing from the CPI — and the doubts about its methodology
Spain's INE excludes home purchases from the CPI because it treats them as investment, yet rent carries only a 3.6% weight. Statistics or spin? We examine the debate.
English · Original discussion in Spanish · Published
Housing, the CPI's great blind spot
While housing has become the biggest expense for Spanish households, the INE (Spain's statistics institute) still does not include home purchases in the Consumer Price Index (CPI). The official argument: it counts as investment, not consumption. Yet rent, which is included, carries a weight of just 3.6%. The paradox fuels suspicions of statistical window-dressing.
Investment versus consumption: the methodological dilemma
The INE maintains that buying a home is an asset purchase, not a current expense, and therefore does not belong in the CPI basket. The European Union has been searching for years for a formula to incorporate it without distorting the index. Critics, however, argue that this decision hides the true cost of living. Some analysts point out that including housing would push official inflation sharply higher, as was already debated during the previous bubble.
Rent's laughably small weight in the basket
Although the INE does track rents, their weighting is minimal: 3.6%. For those who spend more than half their income on housing — whether mortgage or rent — the disconnect with reality is glaring. Defenders of the method argue that the CPI measures final consumption, not assets, and that including housing would distort international comparisons. More sceptical observers see it as a manoeuvre to soften inflation figures and avoid wage pressure.
Real CPI versus official CPI: a widening gap
Alternative analyses suggest that, if housing were properly weighted, cumulative inflation over the past five years could be as high as 60%, versus the official 10%. One concrete proposal calls for building an "underground" CPI based on frequently purchased goods — petrol, milk, oil, bread — plus rental housing, to capture the real price evolution affecting the middle class.
What no analysis has fully explained is why, with housing accounting for 50% of family spending, the INE still cannot find a formula to include it without "distorting" the index. The answer, perhaps, is not technical but political.
Related discussions in the forum
While housing has become the biggest expense for Spanish households, the INE (Spain's statistics institute) still does not include home purchases in the Consumer Price Index (CPI). The official argument: it counts as investment, not consumption. Yet rent, which is included, carries a weight of just 3.6%. The paradox fuels suspicions of statistical window-dressing.
Investment versus consumption: the methodological dilemma
The INE maintains that buying a home is an asset purchase, not a current expense, and therefore does not belong in the CPI basket. The European Union has been searching for years for a formula to incorporate it without distorting the index. Critics, however, argue that this decision hides the true cost of living. Some analysts point out that including housing would push official inflation sharply higher, as was already debated during the previous bubble.
Rent's laughably small weight in the basket
Although the INE does track rents, their weighting is minimal: 3.6%. For those who spend more than half their income on housing — whether mortgage or rent — the disconnect with reality is glaring. Defenders of the method argue that the CPI measures final consumption, not assets, and that including housing would distort international comparisons. More sceptical observers see it as a manoeuvre to soften inflation figures and avoid wage pressure.
Real CPI versus official CPI: a widening gap
Alternative analyses suggest that, if housing were properly weighted, cumulative inflation over the past five years could be as high as 60%, versus the official 10%. One concrete proposal calls for building an "underground" CPI based on frequently purchased goods — petrol, milk, oil, bread — plus rental housing, to capture the real price evolution affecting the middle class.
What no analysis has fully explained is why, with housing accounting for 50% of family spending, the INE still cannot find a formula to include it without "distorting" the index. The answer, perhaps, is not technical but political.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (14 replies).
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