Residents in the Hills district expecting windfalls of millions of dollars for their homes from high-rise developers after rezoning along the new North West rail line face a major setback in their plans to cash in.

On Tuesday night The Hills Shire Council voted to put on public exhibition its plans to limit high density housing to areas closer to stations, often on council land, and permit only lower developments elsewhere.

“[The] night was about who stole Christmas,” said David Dowling, the principal and a director of Ray White Castle Hill.

“The council has decimated the height everywhere except on council land. Some people who thought they’d get 18 storeys on their land will now get only four.”

There had been scenes reminiscent of an old-style gold rush after the NSW State Government released its vision for the north west rail link corridor in September 2013, pinpointing locations for high density housing and employment.

With developers eager to build apartment blocks of up to 18-20 storeys in an area that previously hadn’t allowed much high rise, home-owners banded together to sell their homes and land blocks for up to four times what they might be worth as single houses on the current market.

But the local council has quashed many of those great expectations with its draft The Hills Corridor Strategy which says the State vision was intended more as a high level strategic framework for planning, rather than a blueprint of what will happen.

“It created significant development expectations within the community, some of which are unrealistic, and a lot of speculation,” said Michael Edgar, the council’s group manager of strategic planning. “This is the council’s take on how we can accommodate the State Government’s housing and employment targets.

“Many of the expectations of high density apartments would prove difficult to adequately service with local roads, parks, playing fields and community facilities. Now we are trying to start a discussion with the community about what their future suburb will look like in terms of a living environment, its character and amenity.”

The council’s overall proposal provides more homes than the State Government’s plan – 2491 additional homes in Castle Hill as against 1131 – but they’re spread out over a wider area, rather than having big blocks of higher towers.

One local home owner Glen – who asked for his surname to be withheld – says he’s devastated by the new draft. He, together with 14 of his neighbours, had their houses up for sale for an expected sum of over $4 million each on Olola Avenue, Castle Hill. His house is currently valued at around $1.2 million.

“We’d been advertising and had received offers and were considering one,” said Glen, 33, the father of two children, aged three and three months. “But now, instead of eight to 10 storeys on our properties, we’re being told we won’t be getting any at all, even though across the road there would be high rise.

“The change for us is dramatic. I’m very disappointed but this is a draft and I’m hoping it won’t end this way. But now our lives are going to be on pause for an undetermined period of time.”

Ray White director Phil Kelly also blasted the draft plans, saying they were only released a few days before the meeting, and that they’d shocked the local community in how much they varied from the concept draft which had allowed a maximum height of 20 storeys in some cases.

“We understand the new plan drastically reduces allowable density, reducing or eliminating entirely the financial viability of many planned projects,” he said. “From our perspective, the prospect of a backflip on the original plan seems wholly unfair for the buyers who have operated under the original premise provided by the council for the past nine months, as well as for those sellers who are yet to transact.

“I think everyone’s still in shock. A lot of residents were expecting to receive significant sums of money and, at the 11th hour, that’s been taken away from them. We’re talking about big sums of money and these are real consequences. All bets are off in some cases today.”

Over 200 locals with their homes on the market or who’d been planning to sell or hoping to finish negotiations in the next few days have all put their plans on hold.

Deputy mayor Councillor Yvonne Keane said the plans were still a draft and, now they’d been put on exhibition for the next 28 days, the discussion should start about the future of the area and how it should look.

“There’s been so much speculation, we wanted to provide residents with some clarity about where the density is going to be,” she said. “It’s a very long process that will take a couple of years.

“We want to plan very carefully to retain the essence of what makes the Hills Shire a beautiful place to live, work and play.”

Many of those who’d been planning to sell up for a huge profit had said they were planning to buy something out of the Hills Shire for their retirement. Glen said he’d been planning to buy acreage elsewhere as, “I don’t want to live over the road from high rise and it’s getting too busy in Castle Hill.”

Edgar said the new draft plans were about the community they’d be leaving behind. “I don’t blame the landowners because of course it would make a big difference to their lives and futures to get $4 million for their houses instead of $2 million,” he said.

“But we’re taking a sensible look at how we can accommodate new people and keep the character and built form of the place we still want to be able to call home.”