A storybook house around the corner from one of New Zealand’s oldest preserved neighbourhoods is on the market for sale.

The gingerbread-style two-bedroom cottage at 12 Nile Street, in central Nelson city, is part of a precinct of charming Victorian cottages and shops known as South Street.

Ray White agent Robin Goetzke, who is marketing the house for a December 7 auction with Martin Wilkie, said the 1860s cottage is attracting attention because it has both residential and commercial zoning, but the owners pay only residential rates.

“Previous owners used to run an antique shop out of the front rooms. All the neighbouring shops are commercially zoned," he said.

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“It’s very rare that something comes up here."

The two-bedroom character home for sale at 12 Nile Street West, in Nelson. Photo / Supplied

The decor inside is reminiscent of a classic dolls house. Photo / Supplied

The two-bedroom character home for sale at 12 Nile Street West, in Nelson. Photo / Supplied

The wallpaper definitely makes an impression. Photo / Supplied

Despite appearances, the petite cottage's 100sqm of interior space appears surprisingly roomy, with two ground floor reception rooms, a cute kitchen and a utility area currently used as an office.

As well as its gingerbread-trimmed dolls-house-style roof, the colourfully painted cottage has the requisite white picket fence, while insider there are leadlight windows and wood floors. More modern additions include arched windows and door ways, a backyard spa and a roof deck off one of the upper floor bedrooms.

The two-bedroom character home for sale at 12 Nile Street West, in Nelson. Photo / Supplied

The colour scheme extends to the kitchenware. Photo / Supplied

The two-bedroom character home for sale at 12 Nile Street West, in Nelson. Photo / Supplied

A storybook spot at the top of the house. Photo / Supplied

The owners have gone to town with bright wallpapers to background their collections, as they’ve now returned the house to a home.

OneRoof records show the house, which now has a CV of $710,000, changed hands in 2016 for $610,000, but Goetzke said no-one will know what it would sell for in December.

“We can’t compare this to any others, who knows. We’ll see after the auction,” he said.

Buyers from both Nelson and further afield have been drawn to the house, the agent said, with some people keen to turn it back into a shop.

Nelson Tasman’s regional agency says that the South Street precinct is a popular tourist destination. Owners can modernise the interiors of the cottages, but paint and repairs to the exteriors and rooves of the homes have to be in keeping with the character of the street.