UK home rental prices rose at the sharpest pace since 2016 in June, adding to a cost-of-living squeeze.

Rents rose 3 per cent from a year ago last month, stronger than the 2.8 per cent growth in May, the Office for National Statistics said on Wednesday (Jul 20).

Rents are rising along with property prices, with demand outstripping the supply of homes in both markets. The surge in housing costs is stretching affordability for consumers already coping with the highest inflation in 4 decades.

"Rents continued to grow across the country, with the East Midlands seeing the biggest rises," said Ceri Lewis, house prices statistician at the ONS. "London was again lowest, though its rate of increase continues to climb."

A separate report found that UK house prices surged 12.8 per cent in the year to May, up from 11.9 per cent in April. As of May, the average cost for a home is now £283,000, or about £32,000 more than a year ago.

"Annual house price inflation edged up again, with the strongest rises seen in Wales," said Lewis. "London again saw the lowest increase, though prices there are continuing to accelerate."

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In England, house prices increased 13.1 per cent in the year to May, now at a record of £302,000. London prices rose 8.2 per cent, the slowest pace of growth among the UK regions. BLOOMBERG