Likening the current South African property cycle to a climb on Mount Everest, FNB’s chief property strategist John Loos recently identified significant positive signs that the market is improving. In short, we’re on our way down from the most dangerous part of the mountain, known as the Death Zone.

Up here, above 7 000 metres, the human body cannot acclimatize to the low levels of oxygen. Not surprisingly, this is where most of the mortalities (i.e, bankruptcies) occur. And the longer you spend here, the weaker your ability to cope with unexpected shocks becomes.

The good news however, according to Loos’ analysis of key property barometer indicators – including estate agents’ rating of activity; first-time buyers’ activity; and average time on the market (down from an average of 21 weeks and one day to 13 weeks and two days) – is that while there is still widespread financial stress on many households, the interest rate cuts of last year and the relaxation in the banks’ lending policies are clearly driving a moderate upturn in market, which should see us return to positive real house price growth over the course of the year.

What drove us up into the danger zone in the difficult last two years? Loos identified factors such as the oil price shock in 2008, which sent CPI inflation through the roof, eating into disposable income, and sharply rising food price increases. This in turn saw our inflation-targeting interest rates sky-rocket, which was followed by world recession, which hit our exports and increased job losses as South Africa followed the world into economic decline.

The point with high-risk zones – like the SA property market – is that any unexpected event can be fatal. Two key factors put the climber at risk: environmental factors – such as storms, etc – and the physical condition of the climber, which will be weakened by continued exposure to the environment. Recession weakens household sector’s ability to service debt.

Sherpa Mboweni supplied us with artificial oxygen in the form of interest rate cuts – but will Sherpa Marcus follow suit? Loyal Sherpa Obama – with his monetary and fiscal stimulus packages for the US market – helped all of us as he delivered emergency aid to the American economy. But how long can all this artificial oxygen last? Is Obama following Zimbabwean model? When will the market be able to stand on its own two feet again? No one really knows…

Meanwhile, in South Africa, the ratio of household debt to disposable income is improving – slowly – as the economy recovers, giving us more room to cope with future interest rate hikes that are probably in the pipeline. A mild 2% interest rate is expected by FNB in the next two years, before we see the next significant rate cut cycle in 2013.

Looking ahead to the next decade, Loos looked at the changing structural demographics of the country, as we move from a typical developing world population base towards an aging population and the continued emergence of the Black middle class. These large-scale forces should see the following trends become more and more evident:

· A marked increase in the number of households

· Fewer people per household

· Smaller houses on smaller stands, and more sectional title housing

· Greater urban densification along corridors of public transport

· Fewer luxury items such as swimming pools and servants’ quarters

· A steep growth in demand for retirement housing

· Greener housing with regard to water and energy consumption

· Greater emphasis on household running costs

· Affordability will no longer be based on purchase price alone.