A failed attempt to steal copper from a hot water cylinder at a Highbury flat appears to have become an act of arson.

Detective Sergeant Ashley Gurney, of Palmerston North, said it appeared a fire had been deliberately lit in an unoccupied Housing New Zealand flat on Farnham Ave, Palmerston North, following an attempt to remove the hot water cylinder.

Those attempts were abandoned however, possibly because it was a gas hot water storage cylinder and potentially contained combustible materials, he said.

Fire services were alerted at 3.33am on Thursday, and were called back to the house just before 6am, when the fire flared back to life.

The fire caused extensive smoke damage and some heat damage to the downstairs floor of the house.

J T Tawhai and Holly Anderson, who were asleep in the adjoining flat, were woken up by a knock on the door and Miss Anderson's dog barking some time after 3am, Mr Tawhai said.

At the door they found a man who told them the neighbouring house was on fire and that he had called emergency services.

Mr Tawhai said he didn't get the man's name and he disappeared shortly after.

"We just went over and saw the house on fire and flames all in the window."

The flat, which was one in a block deemed an earthquake risk, had been unoccupied for about a week, he said.

Mr Tawhai said they both heard noises overnight, but put them down to strong winds and usual older house noises.

Mr Gurney said it was fortunate neighbours were alerted to the fire, which could have turned explosive if it had come into contact with the gas.

Police were interested in hearing from the man who awoke Mr Tawhai and Miss Anderson.

They also wanted to speak to anyone in the area who might have seen something at the time of the fire.

- © Fairfax NZ News