"I ran over and I heard her screaming: 'Help, help! My mummy's dead'."
A man was then seen coming out of the house, getting into a vehicle and driving off.
The woman was already on the phone to police by then, she said, and approached the property to see if she could help.
"I went to the doorway and I could hear a woman who wasn't that (first) woman I heard.
"There was a lot of blood. I sprinted back to my house and grabbed my first aid kit."
The second woman was older and is thought to be the mother of the man, she said.
"She was cut - she had a slice down her arm. It was bleeding profusely. The woman and the children were covered in blood."
The neighbour said at least three other people she believed to be neighbours were in the house trying to help the then seriously injured woman when she got back with her first aid kit.
The children's mother was not in a good way.
"I could see her feet. There was just a lot of blood.
"I was quite aware from the beginning... when (paramedics) didn't bring her out that she was too far gone."
The woman said relatives arrived on the scene just before emergency services and quickly gathered the two children into a car, where they stayed for at least two hours after.
'My mummy's dead'
The little girl, who she guessed was about three years old, was very much in shock.
"She just kept repeating it: 'My mummy's dead, my mummy's dead, my mummy's dead'."
The woman, who has lived on the street for the last few months, said she did not have much to do with the family - only offering a wave or two or chucking a stray ball back to the children.
She said other than the two children at the scene last night, two primary-aged boys - regularly stayed at the property.
But they were not there last night, she said.
A 34-year-old man was this morning charged with murder and wounds with intent to cause grievous bodily harm.
He is due to appear in the Hamilton District Court and police say they are not looking for anyone else in relation to the matter.
Officers remain at a scene guard at two addresses.