A NEW subdivision in north Dennington designed to provide affordable housing could instead turn into a sought-after river suburb.

It will feature a boulevard following the Merri River and have some of Warrnambool's most scenic parkland on what is now flood-prone river boundaries.

The proposed 900-lot housing development will have a multi-purpose trail, making the river more accessible to the public.

It will be bordered by the boulevard and be linked by several car parks and have seating every 200 metres.

There will also be a new playground, shelter, public toilets, barbecue and fishing jetty.

Housing blocks will be designed to face the river.

The development will provide low-density lots close to the river and conventional-density lots north of the existing Dennington township, providing a total population growth equivalent in size to Port Fairy.

During council discussions on Monday to officially incorporate public open space into the plan, Cr Jacinta Ermacora said blocks could be more expensive than anticipated.

"I suspect prices may be higher than intended because the area will be stunning and beautiful," she said.

"Hopefully with 900 blocks many will be affordable."

Cr Adrian Jacobs predicted the blocks would be well sought after because of the "fantastic" open spaces.

Cr Michael Neoh described it as a sophisticated plan providing important access to the river.

"It's not just a grab for land," he said.

Cr Andrew Fawcett praised council staff who prepared the policy.

The north Dennington area is the first of four major growth areas to cater for the city's expanding population.

It is hoped that some of the blocks will be ready for sale next year.