Earlier this week, the Government raised the Queenstown caps on the KiwiSaver HomeStart scheme by $50,000.
Dr Smith is resisting calls to implement a higher cap, which he says would encourage the building sector to build houses that are too expensive.
"We want to provide an incentive for the building and development sector in Queenstown to focus on building more product that is affordable."
"The Government’s never been about providing taxpayer grants for people to buy a flash house," he said.
Labour housing spokesman Phil Twyford said Queenstown deserved special Government attention.
The "hyperinflation" in the housing market meant people couldn’t save deposits quickly enough, he said.
"Set against the scale of the housing crisis in Queenstown, this Government is just tinkering."
HomeStart gives first-time buyer couples $20,000 of their KiwiSaver money towards a deposit for a new-build home in Queenstown priced at $550,000 or less, or $10,000 for an existing home priced at $500,000. Singles get half those amounts.
Income caps were also increased by $10,000 to $120,000 for couples and by $5000 to $85,000 for single people.
But Queenstown mortgage broker Stewart Mitchell says in a runaway market, the Government’s caps are about as "useful as a chocolate fire guard".
Independent statistics from analysts CoreLogic stated a quarter of homes sold in Queenstown Lakes go for under $500,000.
He did not believe that figure, Mr Mitchell said.
"There are very few sales under $500,000. I don’t understand that. It’s impossible."
On Wednesday there were just four residential properties listed for sale at less than $550,000, not including auctions.
Three were new builds.
All were one-bedroom apartments of about 50sqm.
He wanted the Government to massively increase the subsidy cap, as a major increase would alleviate concerns about developers and builders raising prices, and improve quality, Mr Mitchell said.
On Tuesday, new QV figures showed the average house value in the district was $910,000, up 27% in 12 months.
The latest available figures show 74 houses were bought in the district through the HomeStart scheme since it was launched in April last year.
Forty were new builds.
