The Sydney suburb that's SINKING: Mayor issues chilling warning that 841 homes - worth $605million - are at risk of collapse or serious damage

A Sydney mayor has issued a dire warning to homeowners about a sinking suburb which could potentially damage 841 homes worth a combined $605million.

Jordan Springs East is a new suburb near Penrith in Sydney's west which is allegedly built on insufficiently compacted landfill - causing the ground beneath 841 homes to shift.

Properties suffered sunken driveways, cracked brickwork and concrete slabs, and damaged roads, according to The Daily Telegraph.

While the number of properties affected was previously believed to be capped at 30, Penrith Council continues to expand the number of homes with planning warning certificates. 

Jordan Springs East is a new suburb near Penrith in Sydney's west which is allegedly built on insufficiently compacted landfill. Pictured: Homes in Jordan Springs

In September, the council extended the number of homes with warnings from 195 to 841.

Warnings state that the council is investigating 'fill of low relative compaction' under property foundations.

The publication also reported that Lendlease bought 20 homes from individual owners, and have offered to buy another offered to buy 22.

Two homes have been knocked down due to extreme cracking.

Penrith Mayor Karen McKeown said she had a 'moral and legal obligation' to tell homeowners about the possibility of structural damage to their property. 

Properties suffered sunken driveways, cracked brickwork and concrete slabs, and damaged roads. Pictured: Brickwork in Jordan Springs

She explained the council commissioned an independent geotechnical assessment.

'Council is aware that such notations may be of concern to some homeowners and wants to assure them that the decision to take this course of action was taken only after extensive professional assessment and in the best interests of all property owners,' she said.

But Kevin Montier, Lendlease's senior development manager, told Daily Mail Australia the $8billion company is 'disappointed' by the council's 'premature response'.

Penrith Council have commissioned an independent geotechnical assessment. Pictured: Construction workers in Jordan Springs

'We’re disappointed Penrith City Council has acted prematurely by placing a notation on the planning certificates of 841 properties ... while the investigations requested by Council’s experts are ongoing.'

He added that the company had done its own testing with results that were 'supported by two of Australia’s top geotechnical experts'.

Mr Montier told The Daily Telegraph that the group set up a compensation scheme with Fair Trading to support impacted homeowners.