AIB group chief executive Eugene Sheehy has said that the bank's recent sale and lease-back of its Ballsbridge, Dublin headquarters is "a vote of confidence" in the Irish property market. Siobhán Creaton, Finance Correspondent, reports.

The bank chief expressed disappointment at suggestions that the bank's decision to sell its most valuable sites for a €393 million profit was a vote of "no confidence" or that it was selling out at the peak.

Addressing members of the Leinster Society of Chartered Accountants yesterday, Mr Sheehy said the funds from the sale would allow AIB to lend even more money to its customers. "The bank doesn't have a function in the property market", but it does need sufficient capital to fund its growth, he said.

Mr Sheehy said that the deal would give AIB the resources to lend a further €7 billion in new loans plus another €14 billion in new mortgages to its customers. "That is a vote of confidence in the future," he explained.

Mr Sheehy stated that the bank had no immediate plans to sell and lease-back its Irish retail branch network, which has been the subject of much speculation.

The bank chief also took the opportunity to play down any concerns that the Irish property market had peaked or was in danger of overheating. "Very few of our customers are under stress," he said, adding that while property prices were at an all-time high, they were underpinned by affordability.

Mr Sheehy pointed out that the cost of borrowing had more than halved over the past decade, as had personal tax rates. In 1993, interest rates were at 12 per cent, he said, compared to current rates of just over 3.5 per cent.

"Tax and interest rates are the key. They are what is driving the market," he said. "Anything that impacts on these is a cause for concern."

Employment was another important ingredient for sustaining the property market. "This is one of the stress tests that we really focus on," he said.

He did suggest, though, that there may be some long-term social cost to the economy as a result of large numbers of borrowers taking out 100 per cent mortgages. Mr Sheehy said this phenomenon had already begun to affect the mobility of the Irish workforce, as it was getting increasingly more difficult to move people around the country.