Mr Arriaga said he and his New Zealand wife Louise Power had refurbished an old sleepout at her parent's Harington Point house during visits from France in recent years.
They spent eight months living in France and the remainder of the year living in the sleepout where they had recently completed a brand new kitchen.
"The new curtains, the new kitchen, everything is gone. Such a shame. We did all that work..."
Property owners Bob and Mary Laurenson were devastated by the fire, but thankful no one was hurt.
"The grandchildren were out there earlier, but they'd come in to the main house to play and watch telly," Mrs Laurenson said.
"So I'm glad they weren't out there at the time.
Bob and Mary Laurenson survey the remains of their sleepout at Harington Point after it was destroyed by fire yesterday. Photo / ODT
"My mother's antique couch was in there. I had a lot of antique stuff in there, but that is all replaceable. People aren't."
She said she looked out of her kitchen window about 11.30am and noticed smoke coming from the sleepout. She was amazed at the speed the fire took hold of the building.
"The quickness of it was unbelievable."
St Kilda station officer Ed Oskam said the cause was undetermined at this stage, but it was possible the fire was caused by an electrical fault.
While the fire was not being deemed as suspicious, an investigation would be conducted, he said.
Fire appliances from St Kilda, Dunedin City and Portobello attended the blaze, and at its height, there were fears the fire might spread into nearby scrub.
Senior Constable Lox Kellas, of Portobello, said conditions were tinder-dry on the Otago Peninsula at the moment, and the situation could have been very different if the fire brigade had not responded so quickly.
"If we had less luck, I could have been a lot worse. The volleys got here just in the nick of time."