The council's draft Local Environment Plan (LEP) is out for public comment with both planners and community members opposed to more development in the coastal hamlet urging residents to submit as many submissions as possible.

Council's strategic planner Shannon Burt confirmed the LEP has allowances for urban land release at Mystery Bay covering 25 hectares allowing for up to an additional 180 lots.

But the council owned land on the south of Mystery Bay Road is a forested area and the council's settlement strategy has suggested this area be designated an environmental protection zone.

The council instead has entered into negotiations with the owner of cleared agricultural land to the south of Mystery Bay that was more suitable for residential development.

But Mrs Burt said there had been no new discussions for some years and any new residential development would require suitable infrastructure such as sewer and road networks.

Asked under what circumstances would the council restart the negotiations, she said that would depend on the demand for new residential land.

So while the new version of the LEP still has the new urban release land on Mystery Bay Road earmarked for development, the alternate "swap" site has been put on hold and is not in the plan.

"It's been put in a holding pattern and while (the urban release area) is zoned residential and that has been carried through in the LEP, it has the urban release area controls on it and we would need to adopt a development plan and do a strategic environmental assessment."

Contrary to the belief of some in the community, the settlement strategy has not changed the designation of Mystery Bay from coastal hamlet to village.

Examples of other coastal hamlets are South Durras and Moruya Heads, while villages are Dalmeny and Tuross Head.

As Mystery Bay is designated a hamlet the only commercial development deemed appropriate would be a general store or as it is identified in the new LEP, a "neighbourhood shop".