Three crews were called from Dunedin, Lookout Point and St Kilda and the road was closed while they worked on the scene.
One person fled the address and was arrested a short time later nearby.
A FENZ spokesperson said the fire is extinguished.
A neighbour who did not want to be named said she watched the incident unfold and the blaze erupt.
”I’d just got home from work and heard a bit of an altercation going on next door, just a bit of yelling and stuff,” she said.
From her bedroom window, she saw a man in a hoodie jump a fence, followed by more yelling and glass smashing.
The man then smashed a speaker, she said.
A few moments later, she heard the neighbour yelling while using a hose to try and extinguish a fire in the garage.
”There was no way that the hose was going to put it out,” she said.
“And then it just went boom and blew up, basically... there obviously had to be some sort of solvent added to it, because it went up really quickly.”
Her son called emergency services.
She said the area was usually “so quiet” and they never had any prior trouble.