The fire was deemed suspicious and there were reports of people letting off fireworks earlier in the night.
No one was injured in the fire.
Neighbour Gerald Ginther said he had been watching Australian football on his TV when he heard a loud bang and then witnessed a large "turret of flame" out his lounge window.
The fire took hold at the back of the house and its heat was intense, he said.
"It just kept gaining in intensity and it was quite a while before they brought it under control.
"I think in total there were about four or five fire engines, quite a big police contingent and even ambulance, but I don't think the ambulances were needed in the end.
"I thought at one stage our trees might have been at risk on the edge of our property. I nearly considered asking the firemen to dampen down near our property."
The residents of the house had only been living there for a week, Mr Ginther said.
"All sorts of fun and games were happening, there were party buses arriving and departing, quite a few teenagers and apparently they were throwing fireworks at one another at one stage -- but they didn't consider that the cause of the blaze.
"It just seemed to accelerate so fast."
The back of the property had now been rendered a "blackened shell", Mr Ginther said.
"The thing that took the longest to go out was the roof. They just couldn't control the blaze under the roof.
"I assume the house would be completely wrecked. I think they're moving out at the moment."
Champion St resident Tim Oliver said people on the street had been intermittently letting off fireworks on the street since Guy Fawkes.
Canterbury police confirmed no one was trapped in the house.
Detective Sergeant James Simpson said a scene examination would take place today.
"It is too early in the investigations to determine what started the fire but we are keen to hear from anyone who was at the party at around the time of the fire or lived in the vicinity."
Anyone at the party around 12.30-12.45am, was asked to contact Christchurch police on 03 363 7400 or Crimestoppers anonymously on 0800 555 111.