A Brookland Rd resident said she heard a "crack and a smash" before she looked out her window and saw flames billowing from a house next door.
Police and fire are investigating what they are calling a suspicious fire on Brookland Rd at 2.30pm on Sunday in the Western Heights suburb of Rotorua.
No one had been living at the house and no one was hurt in the blaze.
The resident, who didn't want to be named, said she heard the big noise and immediately knew something wasn't right, so looked out her lounge window.
"The house next door is right out our window. Flames were pouring out of the windows. There was heaps of smoke so I just rang the fire brigade."
The woman said she didn't realise the house was empty as she had seen people there only a few weeks ago.
She said within minutes a large crowd of people had gathered to watch the house burning and you feel the heat coming from the house.
After fire crews arrived, she still feared for her own home as there was a tree on the neighbouring property that overhung onto her property. The tree caught fire so she yelled out to firefighters to bring their hoses around to extinguish the flames on the tree.
Rotorua Fire Brigade senior station officer Jim Prescott said they were called to the fire by members of the public at 2.30pm.
Two Rotorua crews and one from Ngongotaha attended, as there were initial fears someone was inside the house.
He said it was his estimation the house was destroyed as the fire had ripped through about 70 per cent of the house.
He said the fire was now under investigation as there was no one living in the house at the time.
"The electricity was on but there were no appliances inside so it's not going to start by itself."
A fire safety investigator was now at the property working out the cause of the fire.
A police spokeswoman said police were called to the fire and were now making inquiries into how it could have started.