While the fire was brought under control by 7.30pm on Saturday, strong winds mean the threat of further flare-ups remained possible overnight.
A total of 28 residents from 14 homes were evacuated to Portobello's Coronation Hall.
They were provided with a meal by Otago Civil Defence and Emergency Management and accommodation has been arranged for those who are unable to return to their homes.
Evacuees would be given access to their homes at 8pm though a Fire and Emergency New Zealand (Fenz) spokeswoman said nearby houses had suffered smoke damage and some people would likely choose to find other accommodation for the night.
Earlier, a Fenz spokesman said crews were called to the scene of the "major event" on Beaconsfield Rd in Portobello at about 4.30pm.
A large house as well as neighbouring macrocarpa trees caught fire, he said.
Fire incident controller Pete Douglas said it appeared high winds had dropped a power line, where a fire had potentially started.
Wind had carried the flame to a house which then became fully involved in fire.The home involved was about 90% fire damaged and was no longer inhabitable, Mr Douglas said.
No one was injured in the fire and the family living in the home had evacuated.
The owner of the property, Heather Morris, said she and husband Warren had purchased the home in 1989 to live in, but had been renting it out in recent years.
The fire had spread to macrocarpa trees on the boundary, destroyed the outside shed and totalled the house.
"It's utterly devastating."
A young family and their three children were tenants of the home.
"They've lost everything, absolutely everything."
No other houses suffered fire damage, but the large amount of smoke had damaged nearby homes.
Otago Civil Defence and Emergency Management advised residents to go to Portobello Coronation Hall or the Portobello Bowling club if they require assistance.
Four fire crews were all at work to try and protect two neighbouring properties and get on top of "spot fires" which had the potential to be started by the wind.
Mr Douglas said crews would likely remain at the scene into the night as high winds meant flare-ups could be likely.
A fire investigator was on their way to the scene from Invercargill.
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