The sbt.ivy.home property is only half of the solution. It controls where the sbt launcher downloads sbt itself (and related dependencies like the scala compiler and library, etc.) As noted by Joachim Hofer, it has no effect on where the dependencies declared by your project get downloaded.
To change that location, you must set the ivy.home property. So, to augment Joachim’s first solution, you would set both system properties:
java -Dsbt.ivy.home=/tmp/.ivy2/ -Divy.home=/tmp/.ivy2/ -jar `dirname $0`/sbt-launch.jar "$@"
With these properties, the launcher will download both your project’s and sbt’s dependencies to the /tmp/.ivy2/ directory. Of course, you can put them in separate directories as well.