Ai Group head of policy Peter Burn said house building                     

offset weakness in apartment, commercial and engineering             building activity in March and that trend was set to continue.

"With apartment activity trending down from historic highs,                 with commercial construction patchy at best and with               engineering construction dominated by the wind-down of                 mining and energy-related projects, growth is relying heavily                 

on the housing sub-sector," Mr Burn said in a statement.

"And the outlook for the next few months is more of the same,             with house builders reporting strong growth in new orders             whereas for the rest of the sector new orders were down                   sharply in the month.

The Ai Group and Housing Industry Association Performance                 of Construction Index (PCI) fell in February, dropping 1.9                   points to 51.2 points from 53.1 points a month earlier but           remaining above the 50-point level indicating expansion.

Housing Industry Association chief economist Geordan Murray             said while residential building activity was edging back up to an           

all-time high, apartment building activity was likely to contract       further.

Mr Murray said the weakness in commercial and engineering       

building was not ideal for the building sector.

"With the positive contribution from the residential                           sector waning, if we are to see the Australian PCI remain in             expansionary territory we will need to see a more                             broad-based recovery in non-residential construction,"                           Mr Murray said.

The index showed falls in new orders and deliveries also                   weighed on the overall pace of expansion in the sector                             in March.

Ai Group said pressure from rising wages and input                         

prices was partially being passed on to buyers, with                               the selling prices sub-index remaining in expansion                                 in the month.

However, builders noted high competition in tender                               pricing kept profit margins under pressure in March.