Do you plan to acquire a main or secondary home in the coming months or years? Do you want to invest in a rental property plan to increase your income? You have certainly heard of the principle of real estate purchasing power. Indeed, the latter will have an impact on your project and the type of property that you will acquire.

In this case, what exactly is real estate purchasing power? How to calculate it? How to evolve it? In this article, we explain everything you need to know about real estate purchasing power.

What you need to know about real estate purchasing power!

The real estate purchasing power is represented by the number of m² that you can acquire, it is a variable data which changes according to several important factors. Purchasing power has faced a substantial price increase in recent years. With this price increase, the French are forced to buy housing with little space. Faced with this problem, it is essential to find a way to increase real estate purchasing power.

What are the factors used to calculate real estate purchasing power?

For measure real estate purchasing power of a household, it is important to consider its borrowing rate (borrowing capacity) and the real estate price calculated per m² in the specific region. The factors taken into account to measure the real estate borrowing power are quoted in the following list:

  • the number of borrowers (borrowing alone or in pairs has an impact on the calculation, especially if you have cumulative income in the event of borrowing in pairs);
  • household income in which there is salary, bonuses, retirement pensions, etc. ;
  • the additional income of the household in which there are alimony, rents received in the case of a rental investment, etc. ;
  • the various household expenses which include alimony paid, current consumer credit and other mortgages, etc. ;

To better understand your real estate purchasing power, it is essential to also know the interest rate of the credit, which has an impact on the overall cost of the loan. The latter will even have an impact on the amount of monthly payments.

Example of real estate purchasing power calculation

For calculate real estate purchasing power, you need to develop a real estate credit simulation. Suppose that your borrowing capacity is €250 for example and that you plan to acquire a property in Rennes, where the approximate price per m² is €000.

Just work out the following calculation to find the number of m² that your real estate purchasing power allows you to acquire: 250 / 000 = 4. Therefore, with such a budget in this region, you will be able to buy real estate of 093 sq.m.

How to increase the ability to buy real estate?

Several solutions are available to you to allow you toincrease your borrowing capacity or real estate purchase. This will allow you to give life to your real estate purchase project in a faster and less restrictive way:

  • obtaining a best mortgage rate : try to find the most interesting borrowing rate or borrow more when the rate drops to naturally increase your real estate purchasing power;
  • subscription to the subsidized loan: this also makes it possible to reduce the total cost of credit and helps you to buy larger by borrowing more;
  • choosing the right borrower insurance: this has an impact on the cost of credit and naturally influences your borrowing capacity and your real estate purchasing power;
  • increasing the personal contribution: it is recommended to have a high personal contribution. Try to increase it by saving so you can borrow more;
  • increasing the duration of the home loan: to have fewer repayments to make compared to credit over the short term;
  • the choice of a less expensive city: to buy a larger property, you have to be ready to travel a few more kilometers.

Finally, also consider increase your source of income if possible. A higher cash flow is necessarily synonymous with more choices for a real estate investment.