The landowner of the 198-hectare site on Park Road nominated it to be developed into a residential area after Planning Minister Brad Hazzard called for recommendations of housing opportunities.

The purpose was to identify sites in appropriate locations and with adequate infrastructure that will increase housing production in the short term at no additional cost to the government.

It was the only site in the Liverpool local government area of the 43 nominated across the state.

Other sites nominated in Liverpool's rural backyard included Bringelly, Catherine Field, Luddenham, Mount Vernon and Kemps Creek.

A thorough examination of each site by a committee will now take place. If rezoning is proposed for any of the sites, they will be placed on public exhibition.

Submissions from Liverpool Council will be taken into account.

The housing sites are separate to those already earmarked in the South West Growth Centre which will include up to 110,000 new houses over 25 years.

A spokesman for the Department of Planning said Wallacia was not included in the South West Growth Centre under the former 2005 Metropolitan Strategy.

"At the time it was not seen to be needed for future housing demand during the life of the strategy," he said.

"However, that strategy always envisaged a process which allowed land to be released outside the growth centres if there was sufficient demand.

"Seven years on from the launch of that strategy, Sydney is producing only two-thirds of the housing it needs and there is therefore a clear need to examine sites such as Wallacia.

"Such sites must be able to provide their own infrastructure or use existing infrastructure."

The spokesman estimated the 43 sites nominated had a total area of 12,000 hectares.