The commuter belt is set to buckle under the weight of large numbers of people leaving cities in search of more affordable homes.
A focus on putting more residential housing in areas outside Dublin will put pressure on schools and transport links, the Banking and Payments Federation Ireland said.
It says the creaking infrastructure could become a major issue, warning of "a negative impact on the overall competitiveness of the Irish economy".
Families are looking to the commuter belt and apartment living as potential ways to escape the clutches of the housing crisis.
Soaring property prices are pushing more people to buy homes in the counties around Dublin.
And one in five housing units being constructed is now an apartment, the highest share since records began.
Amid affordability issues for many families, the Central Bank is resisting pressure from the Taoiseach and the head of the country's biggest lender to alter strict mortgage limits.
The lending limits have been blamed for a slowdown in home building, and for trapping people in rental accommodation.
Taoiseach Leo Varadkar previously said the rules were "very tough" on young couples paying sky-high rents while trying to save for a deposit.
But new governor Gabriel Makhlouf has refused to bow to pressure to ease the restrictions.
The Government is under huge pressure over housing, narrowly surviving a Dáil vote of no confidence in Minister Eoghan Murphy this week.
Meanwhile, Threshold and Simon Communities both issued scathing reports on the rental crisis and the impact of homelessness on families in Ireland.
The 95pc rise in house prices in the Dublin region since 2013 means current income levels and strict Central Bank lending rules are combining to price people out of buying in the capital.
This has seen a 41pc rise in the number of people now buying in the Dublin commuter belt who are moving county.
The population growth in these commuter counties, which include Louth, Meath, Kildare and Wicklow, are set to put pressure on transport links and schools in these areas, the banking federation said.
Dublin first-time buyers now have an average deposit of €51,000. In commuter counties the average deposit is now €37,000.
In its later ‘Housing Market Monitor’ publication, the banking body stated: “Regional mobility perhaps shows the flexibility of the workforce in the Irish economy.
“However, it should be noted that the pattern of more residential housing activity taking place in the Dublin commuter belt is likely to put pressure on the infrastructural needs in these areas, which is likely to have a negative impact on the overall competitiveness of the Irish economy.”
It added that price rises are making it impossible to buy for those who want to live close to where they work, or live at the moment.
The federation also notes an 81pc increase in the construction of apartments in the July to September period, compared with the same quarter last year.
Many are being snapped up en masse by cuckoo funds, denying first-time buyers the chance to buy them.
Almost 5,700 new dwellings were completed in the July to September period, a 22pc rise on the same period last year, the banking body said, quoting Central Statistics Office figures.
Some 1,086 apartments were completed in the third quarter, a rise of 81pc in the year.
Apartments represented one fifth of all housing completions during the third quarter. This is the highest share since 2011, when the current CSO data series began.
Dublin accounted for almost three quarters of new apartments.
However, cuckoo funds are increasingly active in the market snapping up whole blocks of apartments, pushing out potential first-time buyers.
Block sales to so-called cuckoo funds are controversial because they reduce options for first-time buyers, who struggle to compete with institutional investors and social housing providers.
Last week, builder Glenveagh sold 87 new units in Dundrum, south Co Dublin, to a German property fund. The total sale price exceeded €600,000 per unit.
The high-end apartments are to be leased to Dún Laoghaire-Rathdown County Council for social housing.
Banking and Payments Federation chief economist Ali Ugur said: “Price developments are seriously limiting potential buyers’ preference, particularly first-time buyers, to live in areas closer to where they work or currently live.”
He said that the average income levels of this cohort of potential buyers are affected by Central Bank lending limits.