The 34-year-old woman, her son (7) and daughter (4), along with her stepfather, who was sleeping in a mobile home at the rear of the property, fled when the fire started in the open plan lounge shortly after 7.30am.
Southern regional fire safety officer Barry Gibson said it could have been "a very, very different scenario" if the occupants had not got out before the gas cylinder vented.
"It was fortunate - they lost their possessions but no-one was hurt," he said.
The mother, who did not want to be named, told the Otago Daily Times she was dozing in bed when her daughter rushed in and said there was a fire.
She "jumped up" and found a fire in the lounge, gathered up her children and called out to her stepfather to flee.
She was horrified at how quickly the fire spread after that - fire officers said about 60% of the house was fire-damaged and the rest smoke-damaged.
The family arranged another house to move to yesterday but lost virtually everything they owned.
The woman was annoyed the house did not have smoke alarms, which she thought were compulsory in rental properties.
However, Mr Gibson said that was a mistaken belief. While it was ideal that rental properties had smoke alarms, it was not compulsory and it was up to tenants to ensure alarms were fitted and operating.
Mr Gibson said the fire was accidental, starting in the lounge then spreading rapidly when the gas cylinder vented.
Station Officer Brett Delamere said when the two units arrived after the 7.38am call-out, the house was well alight.
Flames were coming out two windows towards the rear of the property and smoke was issuing from other windows.
The heat was so intense, paint was blistered, guttering warped and windows cracked.
It took about 15 minutes to bring the fire under control - with fire crews having to don breathing apparatus to get into the house.
The fire was dampened down by midday, he said.
