In addition, repair and maintenance work fell 1.3%, with decreases in public housing and non-housing repair and maintenance.
However, output on a three-month basis has risen by 1.8%, while infrastructure grew month-on-month for the third time in a row, rising 3.5% in January. However, figures were down month-on-year for the 13th consecutive month.
All new work showed signs of flattening out with growth of 0.1% in January, yet the sector continued to grow in the latest three months at a rate of 2.1%, compared with the previous three months.
New orders fell by 2.8% in the fourth quarter of last year, caused mainly by falls in private industrial and private commercial work. Yet, the annual of new orders is now at its highest level since 2008.
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Overall, annual construction output growth has increased to 2.4% from 1.5% for 2016, due to upward revisions for all four quarters.
Michael Thirkettle, Chief Executive of industry consultant McBains Cooper, said the figures show the sector's recovery is "fragile at best".
He added the recent Spring Budget announcements of national insurance rises and loss of tax relief on dividend payments will also affected around 167,000 construction workers.
"In the short to medium term, worries over Brexit remain a constant," Mr Thirkettle said.
"We stand to lose a significant number of the 12% of UK construction workers who come from EU countries as a result of Brexit, which means we will be in a parlous situation.
"Building new homes to meet the government's targets for solving the housing crisis are already significantly behind and the recent Housing White Paper really didn't do enough to make planning processes simpler or free up more land.
"While the Budget announcement of the new T-Levels - putting technical qualifications on a par with A-levels – could do much over the long term to bridge the skills gap, we're going to have to do more in the meantime to discourage UK workers from leaving the industry and European workers concerned over Brexit from throwing the towel in and returning home."
(LM/CD)
