The Australian Industry (Ai) Group/Housing Industry Association (HIA) Performance of Construction Index fell 4.9 points to 52.8 in February.
It was the second consecutive month the index was above the 50 level separating expansion from contraction in activity.
The report said activity in the sectors of house building, engineering and commercial construction all expanded at a slower rate in February while apartment building slumped to contract during the month.
AI Group director of public policy Peter Burn said the survey supported the improvement in the construction sector since hitting a low 12 months ago.
"The house building sector, in particularly, experienced solid conditions, in line with official data showing a continued increase in approvals for detached houses," Dr Burn said.
"The survey points to housing activity holding up over coming months with firms reporting a further improvement in their order books and the emerging signs of an increase in investor activity.
"The key concern is that higher interest rates and, in particular, the clear risk of further increases, will pull back growth in coming months."
On Tuesday, the Reserve Bank of Australia (RBA) lifted the overnight cash rate by 25 basis points to 4.0 per cent.
The rise was the fourth rise by the central bank since October 2009.
Debt futures markets are pricing nearly three further rate rises of 25 basis points each by the end of 2010.
HIA senior economist Ben Phillips said the detached housing sector continued to recover, while apartments remained volatile.
"The sustainability of that recovery will be tested later in 2010 as social housing and first home buyer activity declines and interest rates increase," Phillips said.
"The poor showing of the apartments sector is indicative of continued credit issues in the sector.
"A broad-based housing recovery will not be complete until the volatile units market consistently stays in expansionary territory."
Source: AAP NewsWire
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