Crews from Southsea Fire Station were called to tackle the blaze in Fawcett Road, Southsea, at 3.57am today.
Nobody was inside the property and firefighters had to smash a window and break the front door to get inside.
Callum Slater, who was evacuated from his home next door by a passer-by, said the property looked to be badly damaged.
‘It seems to be quite extensive,' the 27-year-old said.
‘Looking in the front door, which had been taken off its hinges, it’s all blackened and stuff is peeling off the walls and ceilings.’
A passer-by called firefighters after seeing smoke billowing from the house and noticing its front door was hot to touch.
The incident caused smoke to enter other homes in Fawcett Road, with fire alarms triggered in at least one other property.
Terrified Parkinson’s sufferer William Payne, 72, was stuck in bed as the fire broke out.
‘I was fast asleep at about 3am, suddenly the bell rang. I’m a very light sleeper and I thought it was a mistake,’ he said.
‘Then all of a sudden it was bang, bang, bang and the bell rang and it went on for about half an hour.
‘I was petrified, then all of a sudden there were firemen everywhere – they said the house next door was burnt down.’
He added: ‘They said if the fire had come through the wall it would have come right through here. I’m only here by the skin of my teeth.’
The fire was put out by 5.30am, but police cordoned the property off to investigate this morning.
Clairvoyant Mikquita Morgan, 56, who leaves across the street from the fire, had feared the blaze was ‘started deliberately’ before police intervened.
‘What surprised me was I didn’t hear anything,' she said.
A Hampshire Constabulary spokesman said: ‘We were called at 4.42am following reports of a fire at an address in Fawcett Road, Southsea.
‘The incident is being treated as arson and enquiries remain ongoing at this time.’