A display site of tiny houses is set to open in Melbourne as interest in small-scale living continues to sweep the country.

The Tiny House Village is slated for a vacant block of land on Punt Road, South Yarra.

It aims to be Australia’s first one-stop shop for people interested in micro-sized dwellings, and will feature eight sites for manufacturers to display their products.

A planning permit has been lodged with Stonnington Council for the display site, which organisers hope to open early next year.

The tiny house movement originated in the United States but has taken off across the globe in recent years.

The small houses, typically between seven and 37 square metres, usually generate their own power and can be designed to be easily transportable.

Those on the display site would range from budget options starting at roughly $60,000 to higher-end designs that come with a $120,000 price tag.

The movement’s popularity can partly be linked to the growing interest in minimalism and following a simple, no-frills lifestyle.

But property consultant Clem Newton-Brown, the man behind the Tiny House Village display site, said it was also appealing because it offered a viable solution to the housing affordability crisis gripping cities such as Sydney and Melbourne.

Mr Newton-Brown, a former state MP, said the average size of a new, detached dwelling in Australia was 231 square metres, a figure that had doubled since the 1960s.

“Bigger houses cost more money to build; they cost more money to run and you need to buy more land to put them on,” he said.

“We’re seeing the impacts now with housing affordability and homelessness that there is not enough density in the way we live. But living denser doesn’t necessarily mean stacking people up in apartment blocks.”

Mr Newton-Brown, the former Liberal member for Prahran, said governments around the country should look at changing planning policy to allow people to rent out tiny houses in their backyards. Regulations do not currently allow a tiny house on an existing block to be considered a separate dwelling.

He said tiny houses could be “the silver bullet” politicians were looking for — a solution to increasing urban density without destroying neighbourhood character.

Several Australian companies specialising in tiny houses, including Contained and Wagonhaus, have expressed interest in the Melbourne display site.

Wagonhaus, a Tasmanian manufacturer of tiny eco-homes with wheels, has only been in business for a year but has received “massive, massive interest”, according to director Kylie Bell.

Ms Bell said she was fielding enquiries every day from a diverse range of people.

“You get single mothers with children, through to people looking for short-term accommodation and couples who are tired of renting and want to go off grid,” she said.

For Anatoly Mezhov, director of Contained, his products are geared towards short-stay accommodation, such as holiday homes or luxury cabins that can provide additional streams of income for property owners.

He said a display in the inner-city would allow the tiny house movement to reach more people.