The fire broke out shortly before 4am on Otago Anniversary Day in the rear property in Totara Tce.
Neighbours raised the alarm and volunteer firefighting crews from Wanaka, Lake Hawea, Alexandra and Luggate attended.
All the residents and their pets escaped the blaze except for one hunting dog.
Fire and Emergency New Zealand fire risk management officer John Smalls said fire investigators began sifting through the remains on Wednesday and found the cause of the fire was a lithium ion battery exploding in a lean-to attached to the garage of the rear house.
Mr Smalls said the battery would have exploded with quite a high intensity and it would have set fire to the plastics around it.
He believed it could have been a power tool battery that was being charged.
"The occupant had not done anything wrong," he said.
It was fairly common for people to leave their batteries on charge overnight but they needed to be treated with care, he said.
Fenz recommended smoke detectors in the bedroom, hallway and living rooms where possible and in high dust or smoke areas (such as the kitchen or garage) domestic heat detectors could be useful, he said.
However, negating a likely cause of fire was the best prevention, he said.
"Smoke detectors are only there as a backup in case things go wrong. You don’t want to be doing silly things and depending on the smoke detectors to save you - it does not work like that," Mr Smalls said.
On Sunday afternoon the residents of the houses involved in the fire attended a fundraising event at the Wanaka Skate Park.
Property owner Kylie Stewart said the Wanaka Skate Club had been their saviour and they continued to be overwhelmed with support from the Wanaka community.
"We have had a family give us a house to live in, my sister has given us a car, and we have not had to worry about food and clothing yet as they [the community] have come to our need without even asking."
Ms Stewart said she planned to rebuild but the money from insurance meant it would be "pretty tight".
Wanaka Skate Club vice-president Wayne Pretty said the fundraising event raised $1500 and several Wanaka businesses donated gift vouchers totalling $500.
