The vast majority of Lake Hayes Estate residents are "very happy" independent commissioners have vetoed proposals for six two-storey houses in Howards Dr, the residents' group says.
However, the developer has not ruled out an Environment Court appeal against the decision.
Lake Hayes Community Association chairman Kevin Burdon said most residents wanted the proposed development area to remain a green belt, which buffered most of the estate.
Residents were concerned about the detrimental effects of "high-density" housing on privacy, amenity and traffic safety.
Commissioners Jane Taylor and Sally Middleton last week declined land-use consent for the construction of six freestanding two-storey residential units, including associated landscaping, access formation and earthworks.
The proposed rural general zoned site is on a 1.1226ha lot north of where Howard's Dr enters the suburb.
The commissioners said the extent of the development would "degrade the natural and Arcadian pastoral character of this landscape through over-domestication".
They accepted the evidence of two Lakes Environmental planners, who said proposed development in a rural buffer zone was clearly urban and there were several undeveloped residential zone lots within a 500m radius of the site.
However, the commissioners agreed the lot could absorb a single dwelling on the lower terrace, if appropriately designed and located.
Lake Hayes Estate Ltd developer Mike Coburn said he did not agree with the decision and would "review the document fully and respond appropriately".
When asked if he would appeal, Mr Coburn said there was "every likelihood".
The notified land-use consent application originally sought to construct a 12-unit comprehensive residential development on the site.
All 64 submissions on the proposal, of which 26 were from real estate agents, opposed the application.
A pre-hearing meeting was held on November 5, 2009.
Lake Hayes Estate Ltd heard concerns from submitters.
The developer reduced the number of units from 12 to six, reduced their height and relocated them to the flat area of the site.
It also reduced construction time and amended landscaping to increase screening.
In its application LHE also offered to set aside a 4586sq m site as a reserve , which would contain a pond and waterfall.
The commissioners acknowledged the offer was a "positive effect" of the proposal.
The hearing was held in Queenstown on April 29 and involved a site visit.
The commissioners said an agreement on a covenant regarding noise, between LHE and the previously opposing Queenstown Airport Corporation, and the affected-party approval clause on estate property titles, did not affect their decision.
