Moyne Shire Council proposed this week to rezone farmland to allow for rural living at Grassmere, Hawkesdale, Illowa, Koroit, Crossley, Southern Cross and Woolsthorpe.

Real estate agents have criticised the council about building on farmland being too restrictive but the new plans look set to address some of those concerns.

The plans, part of Moyne's rural housing and settlement strategy, would also reduce the lot size for subdivision in those locations to one or two hectares.

Other locations such as Bushfield, Grassmere and Wangoom, and parts of Killarney and Tower Hill, will see the minimum lot size drop from 40 hectares to 15 or 10 hectares.

Brett Davis, the council's economic, development and planning director, said the rezoning would allow for further blocks to be created.

"Lifestyle blocks have become very popular, especially within proximity to Warrnambool and Port Fairy," Mr Davis said.

He said the land the council proposed to rezone was in most cases "already lost to agriculture" and was now lifestyle farms.

"The proposed zones generally reflect the current use of the land," Mr Davis said.

"Planning is careful to balance the needs of agriculture - our biggest industry - against its housing needs. That's why it is generally directed toward existing settlements."

He said property owners who have been considering building on farmland proposed to be rezoned could in some cases find it easier to develop the land without the need for a planning permit.

Mr Davis said there had been a long-term contraction of available houses in Moyne that the coronavirus pandemic had accelerated.

Moyne mayor Daniel Meade said the shire needed to strike a balance between buyers wanting lifestyle blocks and agriculture remaining the biggest industry for the region.

"I'm encouraging people with an interest to make public submission and have your say," Cr Meade said. "This particular strategy has been developed over many years, there's no doubt demand for land has increased recently dramatically."

Some landowners could see the rezoning as a boon as their property values rise while others could be opposed due to the likelihood of a subsequent rate hike.

Councillor Jim Doukas, while supportive of the rezoning, criticised the plan for not doing enough to make more land supply available.

"It's not quite ambitious enough," Cr Doukas said.

"Areas like Southern Cross they will rezone, but the blocks already exist. You get out towards Koroit and head west towards Kirkstall. It doesn't go far enough."

Ultimately, he said proof of whether the strategy opened up enough land would be shown in how quickly subdivision was taken up.

"If they get sold out within three or five years the situation needs to be addressed again," Cr Doukas said.

He said the rezoning would give confidence to those who already owned blocks in farming zones and were considering building a dwelling but unwilling to risk losing the fee of lodging an unsuccessful permit application.

"At the moment you have to apply and run the risk of getting knocked back," Cr Doukas said.

Warrnambool real estate agent Brian Hancock said a strategy to rezone farming land had been long awaited.

"I think if you put up 50 or 60 of those rural lots you'd sell them in the next fortnight," the Brian O'Halloran and Co partner said.

"It's just taken off. Everything is depleted, you'd find it hard to get a titled block for the next 18 months or so."

The strategy also proposes to rezone private land to the north and east of the Budj Bim National Park from farming to rural conservation zone to protect biodiversity and provide a buffer to the park. Patches of farmland around Garvoc, Purnim and Nullawarre would also become township zone.

Public submissions are open until November 8.

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