What is the cost of living in Luxembourg?

Luxembourg is an attractive country that offers an appealing quality of life, as emphasized by the expats who have settled there. However, living in Luxembourg comes at a cost. It is important to take the cost of living in Luxembourg into account when deciding to move there.

Admittedly, Luxembourg's economy is thriving and the unemployment rate is low compared to other European countries. Companies are recruiting and attracting workers from neighboring countries and other continents.

However, despite higher wages than in other OECD countries, the cost of living in Luxembourg is high. Find out more here.

Inflation rate in Luxembourg

As everywhere else in the world since the Covid epidemic and the war in Ukraine, the inflation rate has risen sharply in Luxembourg. It rose from 0.8% in 2020 to 2.53% in 2021, 6.34% in 2022, and 3.51% in 2023. Inflation rose to 3.0% in 2025 and is expected to be 1.5% in 2026.

Nevertheless, the inflation rate in Luxembourg remains lower than in other European countries. According to the latest studies by Statec (Luxembourg's statistics agency), it even appears to be on a downward trend.

Sectors affected by price increases

Since 2020, price increases have been particularly noticeable in the following sectors:

Energy sector in Luxembourg: global price increases

Between 2020 and 2021, households have had to cope with a sharp rise in the price of heating oil (+50%) and town gas (+18%). Diesel has risen by 25.1% and petrol by 22.6%. Today, the price of a liter of heating oil is around €1.57.

This massive increase in energy prices has led the Luxembourg government to set energy prices for 2023 and 2024. Today, the average prices are:

• €0.80/liter for heating oil
• €0.25/kWh for electricity, which is half the normal price
• €1.00/m3 for gas, which would cost twice as much without state aid
• €300/ton for wood pellets, whereas the price should exceed €400.

Housing sector: housing has become unaffordable in Luxembourg

Housing prices jumped by more than 10% between 2020 and 2022. However , in the face of financial difficulties and rising interest rates, 2023 saw a decline in prices. This trend continued in 2024. See the latest real estate market trends

To date, prices stand at over €10,000 per square meter for the purchase of a home in Luxembourg and in many surrounding towns.

At the same time, rents are skyrocketing, reaching more than €20 per square meter.

Housing has become unaffordable for many Luxembourg residents, despite the housing assistance offered by the government. As a result, since 2022, we have seen residents leaving to settle in the Greater Region, across the border. Prices there remain more reasonable, even though they have also risen sharply.

Have you considered applying for a rent subsidy to reduce your housing budget?

Financial sector in Luxembourg: a rise in borrowing rates

Financial services have seen a sharp increase since 2021. After experiencing bank interest rates of less than 1%, borrowing rates have climbed to 5% per year. As a result, it is becoming increasingly difficult to borrow given the amount involved. The market is tightening and without a substantial personal contribution, many residents are no longer able to buy their own homes.

Inflation in other sectors of the Luxembourg economy

During the same period, maintenance and repair services rose by 5.2%, and women's hairdressers by 3.6%.

Clothing prices rose by 6%, while food prices jumped by nearly 10%.

Indexation of wages, pensions, and minimum social benefits

In Luxembourg, a wage and salary indexation system has been in place since 1921 to keep pace with inflation. Based on changes in household consumer prices, the index is calculated on a number of everyday consumer products.

In 1921, the index was calculated on the basis of eight everyday consumer products, such as butter and bread. Today, the price index covers more than 8,000 everyday consumer products, grouped into 255 categories. These include energy and housing, as well as airline tickets, household appliances, clothing, and more. The index is regularly monitored by Statec, Luxembourg's statistics institute.

A 2.5% increase in this index leads to a systematic 2.5% increase in salaries, pensions , and minimum social benefits. Due to inflation, salary indexation was activated several times a year in 2022 and 2023.

No indexation took place in 2024 due to lower-than-expected inflation, which delayed the trigger.

Indexation was triggered in May 2025, bringing wages, pensions, and social benefits to +2.5%, as the CPI threshold was reached at the end of April 2025.

With Statec forecasting lower inflation (around 2.2% for 2025 and 1.5% for 2026), the next indexation would take place in the third quarter of 2026 at the earliest.

Beyond salaries, which appear very attractive in Luxembourg, it is therefore necessary to assess the cost of living in the Grand Duchy.

Luxembourg household budget

Minimum income levels

According to the latest figures published by STATEC (the Luxembourg statistics agency), Luxembourghouseholds had an average total disposable income of €6,572 per month in 2023. However, nearly 23% of them report having difficulty making ends meet, particularly households of Portuguese nationality, households renting their homes, and single-parent families.

This is confirmed by the OECD, which states that the average salary in Luxembourg is the highest among OECD countries according to the latest study , at an average of $65,854 per year.

The minimum wage is currently over €2,500 gross per month for an unskilled employee over the age of 18. However , according to the latest STATEC studies, in order to live comfortably in Luxembourg, a couple with two children needs an average net income of at least €4,213 (+3.3% compared to 2018), a couple without children needs €2,912 (+7.6%), and a single person needs €2,110 (+6.1%).

Breakdown of household expenditure in Luxembourg

Rent and loan repayments are the biggest expenses in household budgets in 2024.

Housing occupies a prominent place in the budget of Luxembourg households. It costs at least €1,542 per month to house a family of four, €1,292 for a couple, and €1,101 for a single person (including heating costs). This equates to 38% of income for a couple and 55% for a single person!

See real estate market and housing prices

Food is the second largest expense for a Luxembourg household. A family of four needs to budget around €920 per month for food. A couple will need €565 and a single person at least €271. This item accounts for up to 25% of a couple's budget.
Social life is the third largest expense, accounting for around 13% of the budget for all types of households.
Transport is the fourth largest expense, accounting for€421 per month for a family of four and €235 for a single person.

Price levels in Luxembourg

When it comes to services and other consumer goods, prices in Luxembourg appear to be higher than in other European countries.

Energy and telecommunications prices in Luxembourg

Electricity and gas prices reached record levels in 2021 and rose even higher in 2022 due to the war in Ukraine. According to the latest figures for 2021, a household spends an average of more than €2,000 per year on heating their home. In total, the energy bill amounts to €335 per month for heating and fuel costs.

Internet subscriptions cost around €50 per month on average, depending on the speed.

Food prices in Luxembourg

On average, you can expect to pay €18 for a standard meal in a restaurant and €3.70 for a coffee. A small bottle of water costs €2.80 on average and a draft beer €5.

At the supermarket, 2.5 kg of potatoes will cost you around €4, and 1 kg of tomatoes or apples €3. A kg of ground beef will cost €20, a liter of milk will cost €1.30, and a dozen eggs will cost around €3.80. A bottle of shampoo costs €4 and shower gel costs €2.

Leisure costs in Luxembourg

A movie ticket costs €12 for adults.

A gym membership costs between €20 and €30 per month, depending on the package. A personal trainer will charge more than €40 for a 30-minute session.

Museum admission costs between €5 and €7 for adults. Children and teenagers get in free.

Lower prices in Luxembourg compared to neighboring countries

Some products are cheaper than in neighboring countries. This is the case for alcohol, among other things (a 75 cl bottle of crémant costs €7). Cigarettes cost €5.50 per pack.

Fuel prices range from €1.50 to €2 per liter. However, it should be noted that prices at the pump are strictly regulated by the government and are identical at all gas stations throughout the country.

Luxembourg is the first country in the world to have introduced free public transport in 2020.

However, to accurately assess the cost of transportation in Luxembourg, it is worth considering the various travel options available, including taxis and private hire vehicles.

To better understand the financial implications of moving to Luxembourg, it is essential to find out how expatriates feel about Luxembourg.