The distraught relatives were left with only the clothes they were wearing as they ran for their lives.
They believe drug addicts burning copper wire are responsible for the blaze.
Home owner Cheryl McKenzie, 61, tells the Daily Voice people had been using the back of her house to do drugs.
“I always have a problem with druggies smoking their stuff behind my house,” she says.
“Once they burnt the bush behind my house, but this time they caused my house to burn.”
Cheryl’s sister, Charlene Williams, 56, lives in a Wendy house in the backyard in Wendy Street, Lost City.
Charlene says she smelt fumes of burning copper around 1am on Tuesday, and by 2am, she was woken by the pungent smell of smoke and by the sound of glass breaking.
“I heard the cracking of glass and quickly woke up to warn my sister and her family in the main house because I noticed my Wendy house burning,” she says.
“The fire spread so fast and burnt my nephew’s Toyota Tazz that was standing next to the house and then it spread to the main house.”
Cheryl says there are only two breadwinners in the family and she feels heartbroken because she lost all her Christmas goodies.
“I just bought my Christmas meat, groceries and curtains, and was prepared for the festive season, and now this happens,” the mom says.
“My 24-year-old son was to leave for work in Hermanus today, but all our clothes burnt out and he couldn’t go to work.”
The family consists of four women, two men, three girls, aged four and 17, and two boys, of three and five years old.
Neighbours have offered to accommodate the family, and have appealed to people to donate clothing, food and whatever else they wished to give and drop it off at the house.
Spokesperson for City’s Fire and Rescue Services, Theo Layne, confirms the incident and says no injuries were reported.
“The City’s Fire and Rescue Services responded to the incident at 2.31am Tuesday. One residential dwelling, an informal structure, a motor vehicle and vegetation was burning.
“Possible cause: a person burning tyres for the copper wire.
“The fire was extinguished at 3.52am.”