Two Taupō teenagers raised the alarm after a sinkhole opened up and consumed a substantial part of a suburban street.

Jono Park and Bailey Malloy were biking home along Arrowsmith Ave about 5.30pm on Saturday when they heard gushing water.

As they passed 12 Arrowsmith Ave they saw a water pipe had burst, and the grass berm and part of a fence were starting to sink into the ground, said Taupō District councillor Anna Park, Jono's mother.

"Jono rang 111, the fire brigade, and Bailey went to 12 and 14 Arrowsmith Ave as they were right where the incident was happening. Luckily nobody was at home."

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The boys then rang their parents, and Park quickly relayed the information to the council team.

Park and her partner also went down to help.

Within 45 minutes the footpath gave way, and soon after, half the road did.

The sinkhole had taken out a grass berm, half a lane and was about six metres deep, Park said.

Emergency services were called and found water pouring down the gully and a significant part of the road washed out.

Taupō District Council asset manager water Tom Swindells said the site was cordoned off overnight and with security until an assessment could be made during daylight.

"Structural engineers have assessed the site this morning to check the safety of a property bordering the slip and they are confident there is no further risk.

"We will be continuing to monitor the site while plans for repair are made."

About 20 properties lost water last night, but it was reinstated to all but two properties within three hours.

Two Boundary Rd properties at the bottom of the gully were moderately damaged, and a significant amount of pumice had been deposited on bordering properties along the gully path, he said.

The council was working on the clean-up with those property owners.

"The damage to the road is significant and we are expecting it will be closed for some weeks," Swindells said.

"All residents can access their properties however we encourage the general public to avoid the area where possible."