One resident said houses closest to Lake Wakatipu were being emptied out.
In Glenorchy, spirits were high as locals gathered at the town's hotel to watch television and chat about the situation.
The water level last night was almost at the top of the jetty at the Glenorchy Marina, with large pools of water on the grass reserves beside the lake.
Rain was still falling on the mountains north and west of Glenorchy.
In Kingston, winds were pushing waves from Lake Wakatipu on to the lakefront reserve.
About 2pm, the water swept over Cornwall St, which runs parallel to Lake Wakatipu and is the closest street to the lake, flooding lawns.
Kingston Community Association chairman Peter Gibson said the water level had been rising, but the winds which picked up about noon made it worse.
With more rain predicted, the association decided to warn residents, through its mailing list, that properties, especially in Cornwall St, could be in danger of flooding.
Home owners were advised to move belongings to upper levels of houses in preparation for a flood.
"Most of the homes closest to the lake are holiday homes, and many of them are sitting empty," Mr Gibson said.
"We do what we can to get in touch with people and warn them of the situation."
Members of the association also moved chattels at the boat clubhouse off the ground.
Australian Peter Shepherd, from New South Wales, who owns a lakefront house next to the Cornwall St playground, said he had been holidaying in Kingston until yesterday.
"When the water was covering the lawn and standing a few inches from the front door, we decided to cut our losses, move everything up as high as possible, and stay at the Kingston Motel for our last two nights," Mr Shepherd said.
"I pray the likely flooding will not do too much damage to the house."
