The urban mid-range housing market will drive the real estate market in 2009 due to population demographics and high market liquidity, said real estate firm Zerin Properties.

Zerin Properties CEO Previndran Singhe yesterday projected strong domestic demand next year as the real estate market would be bolstered by lower interest rates.

Reducing inflationary pressures, the Employees Provident Fund (EPF) allowing withdrawals for payment of housing loans and availability of bank loans were key factors, he said.

Previndran said the mid-range housing market would be strong as 42% of the Malaysian population was in the 20 to 50-year age bracket and could afford properties priced between RM400,000 and RM800,000.

“I still believe most of the action will be in urban areas where you don’t have a chance to build a township anymore. It’s going to be flatted, high rise,” he said.

The key urban areas are Kuala Lumpur, Medini in the Iskandar Development Region, Penang and Kota Kinabalu in Sabah.

Previndran predicted that while 2009 would see fewer real estate transactions and fewer players, the real estate market would not go into a slump as prices would remain stable. Property developers were likely to compete in product differentiation and innovative marketing rather than price wars, he said.

Properties in the lower price range of below RM250,000 a unit, particularly high-rise developments, had been facing downward pressure and slow take-up rates in certain locations, Previndran said.

He also projected slight price increases next year for landed property in prime areas such as Damansara Heights, Bangsar, Sri Hartamas, Taman Tun Dr Ismail and “underdogs” such as Seputeh and Taman Desa.

“It’s a good time for buyers. After second quarter (in 2009), it will be vibrant but with challenges,” he said.

Previndran said the main challenge to the Malaysian real estate market was the lack of confidence as investors adopted a cautious “wait and see” attitude.

Further, he said falling oil and crude oil prices would hurt Malaysia’s earnings and impact on real estate transactions if the downward trend continued.

Previndran also expressed concern at the increase in credit card non-performing loans (NPL) as these were uncollateralised debt. He added that the NPLs currently amounted to RM515 million while the total credit card debt was estimated to be RM2.6 billion.

Previndran expects a flurry of property launches after Chinese New Year as many property developers have rescheduled launches due to fluctuations in construction costs.

Citing a 2QY08 report by National Property Information Centre (Napic), Previndran said launches of new housing units dropped 62.7% compared to 1Q, adding that this created “pent up demand”.

Previndran also said properties taken up by speculative investors, particularly Hong Kong speculators and hedge funds, had seen price reductions as these investors were looking to sell after the global credit crunch.

“This does not dictate the market as their involvement is still very limited,” he said.

He also said the regional investors, particularly those from Singapore, Indonesia and the Middle East, were still keen to purchase real estate in urban areas as Malaysia’s real estate prices were comparatively lower than other countries in the region.