Residents of a Hunter Valley coastal hamlet have welcomed news that two villages may soon have heritage protection but say it will do nothing to stop their fight against overdevelopment of the area.

Catherine Hill Bay and Middle Camp will be listed in a new cultural precinct on the State Heritage Register, in only the second listing of entire communities for protection under the scheme.

Residents of the mining villages have for years battled the state government over development in the area, south of Newcastle.

Last year they had a victory in the Land and Environment Court, which blocked a decision to allow a series of developments around the villages.

The developments, approved by former NSW Planning Minister Frank Sartor in 2008, would have led to the addition of about 800 new homes in the area.

President of the Catherine Hill Bay Progress Association Sue Whyte applauded moves to heritage-list the villages but said she expected the fight against overdevelopment to continue.

NSW Planning Minister Tony Kelly on Wednesday released a proposed State Environmental Planning Policy (SEPP) for lands south and west of Catherine Hill Bay, and north of Gwandalan, which opens the door for the blocked developments to be refloated.

Mr Kelly also announced that new development proposals for the Coal & Allied estate north of Newcastle, and the estate west of Catherine Hill Bay, had been again declared major projects and potential sites of state significance.

Ms Whyte said residents were not against development in the area, just development on the scale previously approved.

“We always knew that they were going to go again,” she said.

“What we’re hoping is that we hope that we can bring those numbers down.”

Heritage listing for the towns was the culmination of 10 years of campaigning by local residents, she said.

“This government by doing this has acknowledged the importance of Catherine Hill Bay, and we can only applaud them for that,” Ms Whyte said.

The Heritage Council is now seeking public comment on the government’s proposal, which would protect 126 homes in Catherine Hill Bay and Middle Camp.

“If supported, the listing will mark just the second time – following the listing of Braidwood in southern NSW four years ago – that an entire town has been placed on the State Heritage Register,” Mr Kelly said in a statement.

“Some of the small cottages in the two villages date back to the 1890s, when coal first began to be shipped from the area.

“They form pleasing streetscapes which evoke the settlements’ origins as a 19th-century mining community.”