National Statistics figures out today show the index measuring the volume of construction output for new private homes slipped to 128 points in the three months to December.
That compares with a near record 134.2 points the previous quarter and in the fourth quarter a year earlier.
The index is based on output volumes measured in pounds and set at 100 points in the year 2000. On a constant currency basis, the fall in output last quarter was more than £130 million.
Across 2007, construction output for all new development climbed 4 per cent compared with 2006, while total construction output, which includes repair and maintenance work, increased 2 per cent.
In the public sector non-housing repair and maintence spending in 2007 tumbled 11 per cent from the previous year, while housing repair and maintence work fell 3 per cent.
New work in the public housing sector climbed 17 per cent in 2007 but off a low base.
Despite the decline in new private housing output staff levels in the construction industry remain close to record highs.
There were 1.9 million people employed in the industry in January, down marginally from the record 1.913 million three months earlier.