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DTZ resource management consultant Philip Murray, acting for the Auckland applicant Jack Govind, said the decision was made following the release of the Central Otago District Council (CODC) planning consultant David Whitney's report which recommended consent be refused.
The proposal had drawn opposition from some local residents.
Mr Murray said Mr Govind was reconsidering whether to go ahead with two houses as outlined in the original application.
"There may just be one house and that house is likely to be moved to the site of the existing building" [known as the fisherman's cottage].
He said a new application may not be lodged, and amendments could be made to the existing application which would likely be lodged by the end of the year.
The council's manager planning and environment, Louise Van der Voort, said the amendments may not be notified. If the proposal was to be changed council would have to consider whether those changes were within the scope of the original application.
"It is difficult to know what we would do until we see the changes," she said.
A total of 211 formal submissions were received when the application was advertised earlier this year, with 208 in opposition. Residents from around the area and from further afield met shortly after the application was advertised to discuss their opposition.
Speaking on behalf of a group of residents opposing the application, Nick Loughnan said the CODC had made a good job of handling the application in commissioning an independent assessment of landscape and visual effects carried out Dr Michael Steven of Vivian Espie Ltd.
That assessment had found the application was inappro-priate.
"It is extremely reassuring to read this Assessment and the justifications for conclusions made," Mr Loughnan said.
Dr Steven said in his report the protrusion of one of the dwellings on to the skyline and the visibility of both dwellings from the Poolburn Reservoir as well as night lighting and access roads would have a significant adverse effect in terms of landscape and amenity values.
He said it could be possible to redevelop the existing cottage on lot 1, but in a far different way to the proposal being applied for, and he did not consider any structure to be appropriate for lot 2.
The applicant had offered considerable ecological restoration of the area but Mr Whitney said the positive effects of the ecological restoration programme were outweighed by the adverse effects associated with the proposed dwellings.
"Our conclusion is that the proposed activity is contrary to matters of national importance and to various other matters as stated in Part 11 of the [Resource Management] Act," Mr Whitney concluded.