In August 2013, when Smith announced the Auckland cap was rising from $350,000 to $485,000, he predicted that it would "treble the number of Welcome Home loans".
"The number of Aucklanders accessing the [KiwiSaver] first-home deposit subsidy is expected to grow from 1030 to 3000 a year, and Welcome Home loans from 52 to 867 per year," he said then.
In fact, only 1139 KiwiSaver deposit subsidies were paid out in Auckland in the year to March this year, and Welcome Home loans in the city have dropped from a peak of 133 in the year to June 2014 to just 74 in the year to last month.
Massey couple Taryn Sumner and Victor Harmon, both 27, who are expecting their first child next month, said it was almost impossible to find anything under the current $550,000 limit.
"There is not much out there for $550,000. I'm going out to Helensville to look for that, too," Sumner said.
"We got pre-approval for $550,000 in May. That would qualify us for the Welcome Home loan scheme. But we struggled.
"It wasn't just the fact that it's that amount, it was the fact that you had to get a valuation on every house and basically now I would say 90 per cent of the houses are for auction, so if you're going to spend $600 on every valuation you're just throwing money away," she said.
Their mortgage broker Stuart Wills said the price limit had to be raised to catch up with the market. But he also warned that any increase would push prices up even higher.
"There will be some houses that were for sale at $545,000 that will now be for sale at $595,000 if they set it at $600,000," he said.
Herald personal finance writer Mary Holm, who has written three books on KiwiSaver, said a $600,000 price cap for the KiwiSaver deposit subsidy "would probably be a pretty reasonable level for now".
"This is taxpayer money, so I don't think taxpayer money should be going for something flash," she said.
But economist Shamubeel Eaqub, co-author of Generation Rent, said any increase at all would be irresponsible when the ratio of house prices to incomes was at a record high.
"I don't think we should be helping poor people into buying homes in this market. I think that is a terrible thing to do," he said.
"I don't think you should do it because you are luring people into an overheated housing market and setting them up to fail."
Q & A
What is a Welcome Home Loan?
Loans to first-home buyers with a 10 per cent deposit, underwritten by the Government.
What are KiwiSaver HomeStart deposit subsidies?
Subsidies of up to $5000 for existing homes or $10,000 for new homes - or twice that for two or more buyers - if they have been contributing to KiwiSaver for at least three years.
What are the current price caps for both schemes?
$550,000 in Auckland; $450,000 in Hamilton, Tauranga, Wellington, Nelson, Christchurch and Queenstown; and $350,000 elsewhere in the country.
How much will the caps be raised?
To be announced this month. The Auckland cap has ranged from 5 per cent to 24 per cent above the lower-quartile house price which is now $590,000, so on past experience the cap might be raised to between $620,000 and $730,000. But if the Government doesn't want to pour too much fuel on the overheated housing market, it may raise the cap only to $600,000.
