After three years of falling property prices and lowered demand for real estate, the tables are turning, with bank mortgage advances back at the same levels experienced in 2000. House prices are also back at the same levels experienced in 2000 and are still decreasing in real terms, while the interest rate remains at a historically low level.There are many indicators that support a measured recovery of the general economy and the local real estate market, and any knowledgeable property investor knows that it is at the bottom end of a cycle where conditions are ripe for sound investment opportunities. Prevailing market conditions mean that savvy investors need to move quickly to make the most of the property bargains that are currently available. However, as the South African economy and property market moves firmly into a stage of recovery, consumers will need to radically adjust their financial mindset in order ensure that the delicate market conditions remain balanced.The two major causes of the lower demand for residential real estate in recent times has been the high household debt to disposable income ratio and the stringent mortgage criteria demanded by the four major banks as they try to negotiate their way out of a sea of delinquent mortgages and increased liquidity requirements placed on them.Consumer debt-to-disposable-income ratio has improved over the last 18 months or so, with levels down to 77,6% compared to the 78,7% recorded previously. However, these levels are still relatively high, and have not decreased much since the peak of 82% in the second quarter of 2008. And while this reduction in debt to income ratio partly indicates that consumers have become more cautious about debt, household incomes have also risen faster than inflation.During 2010 real household disposable income grew by 4,5%. Surveys by labour consultants estimate that salary increases averaged around 8,5% in 2010, while consumer inflation averaged only 4,3% leading to a real (inflation-adjusted) increase in household income. Furthermore, data released by Statistics South Africa reported that gross earnings including bonuses and overtime in the formal sector rose by 11,4% over the year to November 2010.But consumer spending also increased sharply making it clear that consumers are still not reducing their debt adequately, despite the decline in debt-to-disposable income ratios, but are rather spending every cent they earn.South Africans typically have a bad savings culture, and consumer behaviour shows a tendency to rather ‘borrow to buy’ instead of saving up for a purchase. Saving takes discipline and means spending less than you earn, but how many people, despite numerous warnings over the years, have actually adjusted their lifestyle and spending habits to accommodate some kind of savings? Not many at all, according to the Reserve Bank, which indicates a national savings rate of 0%. Many people don’t realise is that even a small saving can actually have a huge effect, especially if that saving is on a bond. If a homeowner had to pay an R100 extra into their bond each month, they would effectively save more on the interest they are paying off than the interest they would gain from investing that R100 into an average savings account, while slowly reducing their level of debt at the same time. While our habits of overspending, overextending credit and saving nothing may be hard to change, unless consumers start implementing sound financial practices and reducing their levels of debt substantially, our economic recovery could be challenged. Consumers may be more aware of their debt situation but our financial future hinges on consumers adopting sound financial management practices going forward.