While the COVID-19 outbreak has affected the performance of most capital cities in terms of dwelling price gains, one market appears to be a "breakaway performer," according to CoreLogic.

The Australian Capital Territory’s Canberra appears to be the "clear winner" amongst capital cities, said Eliza Owen, head of residential research at CoreLogic. Between the end of March and the end of July, dwelling values across the ACT housing market increased by 1.3%, going against the 1.4% decline across national dwelling values.

"While it may seem counterintuitive that prices are rising across the ACT amid a global pandemic, the property market is actually performing as may be expected when the cash rate is reduced," Owen said.

A previous research from the Reserve Bank of Australia showed that for every one percentage point cut to the cash rate, property values may increase 8% over the following two years. Currently, the cash rate is sitting at its effective lower bound at 0.25%.

However, in terms of dwelling segments, the ACT's housing market is faring better than its unit market. In fact, house values in the territory were are at record high in July, increasing by 8.5% over the year to $721,912.

On the other hand, unit values in July were 3.6% below the record-high reached in May 2010. Still, median unit values increased by 2.7% to $445,135.

The unit supply across the ACT had shown no signs of moderating before the onset of the COVID-19 pandemic, according to CoreLogic data.

Completions of units across the territory even hit a record-high in March, reaching 4,427. The volume of units built in the year to March was actually 41.8% higher than last year. It was also 73.8% higher than the average for the decade.

Owen said the ACT seems to be relatively insulated from some of the effects of the pandemic.

"Part of this may be because recent case numbers have been low or non-existent. As of early August, social distancing restrictions were easing across the Territory, and the ACT had gone almost one month without reporting new active cases," she said.

However, while property values continued to rise in the ACT, rents started to fall. Owen said this could be due to the better employment conditions in the capital region, with people more likely to buy a property.

Still, Owen believes the ACT could experience a delayed downturn as the economic repercussions of Melbourne’s second lockdown become more broad-based.

"Investor demand, while already low relative to Australia-wide participation, may also be impacted by lower rent values. As a result, prolonged growth in this market will be subject to how quickly Australia can supress new virus cases, and see recovery in the labour market," she said.

In a previous analysis, Owen said the ACT’s performance is opposite of Melbourne’s. The latter has reported the most significant drop in property values since March at 3.5%. This decline could be explained by two factors: its exposure to volatile growth rates and the substantial demand shock due to the closure of international borders.

 "As federal government fiscal support moves from around $18bn per month to around $3bn from October, housing market conditions will be tested more broadly. This is when we are likely to see a rise in the number of households facing financial distress and a lift in urgent sales," Owen said.