The Japanese Nikkei index at the height of 40,000 points was brought down progressively by primarily both residential and commercial property crashes. (Not the other way around).
One third of the index making up the ASX are mining and resouce stocks that would do well regardless of whether Australia hits the brick wall in a housing crash (so long as global growth is good and demand for raw materials rises in such places as China and India).
The Australian financail sector makes up reoughly another 30% of the ASX. This sector will get hammered in a housing crash. That's right, they will drag down the indicies all the while mining shares continue to do well. These 2 sectors have done in opposite directions before. An exmaple happened for about 6-8 months prior to around mid 2008 where banks shares trended down signifantly when resources shares held up well (then they tanked).
Don't expect retail shares to do well either in a housing crash. The massive househouse debt and credit abuse when things turn sour will devastate retail (not unlike the US experience). Our economy was almost a mirror image of the consumer-led us economy (except now we are an inflated version of the American lesson).
Our share market current "partial" recovery (ASX was 6700 before the GFC) so far has been a natural knee-jerk rebound due to Depression globally being avoided. Resources shares were oversold in the first place. Unfortunately bankng shares now with valuations of almost pr-GFC levels will face the music when our housing bust cycle (being out of sync with the rest of the places that went popped in unison - partly through the emergency 7.5% to 3% emergency rate move and Big Kev's mega housing grants). As we all know, the tide has now turned.
