Chief executive Sandy Graham said the $132.5 million proposal would be "difficult" without government money.
"But we are continuing to investigate different ways we could do this."
The council learned in May its application to Treasury’s National Resilience Plan for the programme would not proceed.
Then, last week, a suggested alternative, the new $1.2 billion Regional Infrastructure Fund, turned out to be aimed at different projects.
Ms Graham said eligibility criteria for the fund appeared to exclude the purchase of land, meaning the council would need to look for "other funding avenues and mechanisms" for the property plan.
"We continue to have discussions with government about ways it could support other parts of our South Dunedin Future programme in regards infrastructure and resilience," she said.
"Property purchase is only one aspect of climate resilience for South Dunedin."
In December last year, 16 possible climate change adaptation approaches for South Dunedin — from drainage and water storage improvements to new planning controls and alternate forms of land use — were laid out.
A risk assessment for the low-lying suburb and a "spatial long list" of adaptation options was due to be released by the end of this year, she said.
"These reports will give more direction on what may be needed and where.
"We are continuing investigations to determine the most effective climate resilience mechanisms for the area."
Ms Graham said the "South Dunedin Future Adaptation Plan", expected in 2026, would include a wider suite of measures "to provide confidence and security for residents".
Dunedin Mayor Jules Radich said the council was "working hard" on climate resilience in South Dunedin.
"We’re working with our communities and making significant investment in the area including building a community hub and purchasing Forbury Park.
"As our plan develops, we will be discussing it with central government to determine what role it might play in tackling the challenges and helping to fund solutions."
The council’s property purchase plan included buying 65 properties a year for an initial five-year period.
In the long term the property was to have been used for a range of adaptation projects — pumps or pipes, parks or wetlands, or new more resilient housing developments.
Cr Sophie Barker said she had high hopes for the programme and was very disappointed the council would not be able to address South Dunedin’s future with "fast action".
But perhaps the timing for the government, which was "very restrained on spending", was not good.
"Of course it’s a blow for the city, and our communities in South Dunedin," Cr Barker said.
"I’m sure we’ll keep plugging away at government.
"Strategically we need to come up with a ‘city deal’, like other cities have: a prioritised list of projects that we want government to co-invest in."
Cr Steve Walker said the funding frustrations were "not a blow but rather a temporary setback".
"The South Dunedin work carried out by the DCC is world-leading in terms of climate resilience and this, I imagine, will be one of many setbacks as we navigate a course forward in unique and uncertain times."
There had been no opportunity yet for councillors to discuss the funding setbacks "so, no, we have not given up on this option", Cr Christine Garey said.
"I certainly haven’t.
"South Dunedin remains the poster community for a proactive strategic approach to address the impact of climate change.
"Central government needs to do a great deal more listening and a lot less tearing the fabric of our communities apart."
Cr David Benson-Pope said he was anticipating "some serious advocacy" of the council’s position from the mayor in particular, "and less of the softly, softly approach he has shown to the new government to date".
Dunedin residents and the majority of the council took South Dunedin’s issues very seriously, Cr Benson-Pope said.
