What is the cost of living in Luxembourg?

The Cost of Living in Luxembourg: The Reality in 2026

Luxembourg is an attractive country that offers an appealing quality of life, as highlighted by expats who have settled there: low unemployment, some of the highest salaries in Europe, high-quality public services, and a multicultural environment. It attracts many expats and cross-border workers every year.

However, the cost of living is also high, and it is important to take this into account when moving there, changing careers, or relocating with a family.

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

However, despite higher wages than in the rest of the OECD, the cost of living is high in Luxembourg. We’ll tell you more here.

Inflation and Income Indexation in Luxembourg

Inflation Rate

After several years of sharp increases, inflation in Luxembourg slowed in early 2026, supported by falling energy prices and government support measures.

Annual inflation (February 2026): ≈ 1.3% (the lowest since 2024).
Official forecast for 2026 and 2027: approximately 1.8%, with potential pressure on food and service prices.

However, the war in Iran and pressure on commodity prices could call this initially positive outlook into question.

Overall, the inflation rate in Luxembourg remains lower than in other European countries. It even appears to be trending downward according to the latest studies by Statec (Luxembourg’s statistical agency).

Automatic wage indexation

In Luxembourg, theautomatic indexation systemlinks wages, pensions, and minimum social benefits to changes in consumer prices. A new adjustment is scheduled for the second quarter of 2026 to offset observed inflation and support purchasing power.

This mechanism limits the erosion of purchasing power, but it also drives up labor costs and may, in the long run, contribute to maintaining high price levels.

Wages and Purchasing Power

One of Luxembourg’s strengths is its wage level.

The average net wage is approximately €5,400 per month, with a net minimum wage (skilled) of €2,620 per month and a net minimum wage (unskilled) of €2,142 per month.

By comparison, wages and disposable income remain significantly higher than in neighboring countries, even though costs (housing, utilities, food) are also higher.

An average household spends around €6,000 per month, according to recent data, which highlights the importance of planning your overall budget.

Housing: the main expense

Overview of the real estate market

Housing remains the main expense for anyone living in Luxembourg, with a three-phase evolution over the past six years.

The 2020–2022 period was marked by a sharp rise in prices, with double-digit annual increases and a national peak of around €8,595/m² in 2024. The capital exceeded €11,000/m², reflecting significant pressure on urban housing.
The 2023–2024 period marked a pause in the surge, leading to a market reassessment.
2025–2026 marks a stabilization of the real estate market, with prices remaining at a high but stable level.

Housing has become unaffordable for many Luxembourg residents, despite the housing assistance offered by the government. Consequently, we are now seeing residents moving to the Greater Region, across Luxembourg’s borders. Prices there remain more reasonable, even though they have also risen sharply.

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

Rental Market (Monthly Averages)

Studio in the city center: ~€1,400 – €1,900
1-bedroom apartment in the city center: ~€1,600 – €2,300
3-bedroom apartment in the city center: approx. €3,500 – €4,500

In addition, there is often a 2–3-month security deposit and possibly agency fees.

Suburbs or areas in the north of the country may offer more affordable rents, often up to 30% cheaper than Luxembourg City.

Buying property

The market remains expensive. The median price of a home is approximately €780,000, with significant variations depending on size and location.

Learn more about the real estate market.

Mortgage Rates

After several years of increases, mortgage interest rates stabilized in 2026. Current rates allow borrowers to plan their purchase or loan renegotiation with greater peace of mind.

On average, short-term variable rates stand at around 3% in early 2026. Fixed rates for 10-year loans are around 3.5%, and for 30-year loans, between 3.7% and 3.9%.

These figures are averages and may vary depending on the bank, the chosen term, and the borrower’s profile.

Points to consider for borrowers

Compare offers from several banks or use a broker to secure better terms.
Assess your repayment capacity by taking into account your expenses and the loan term.
Take into account all associated costs: insurance, application fees, notary fees, and guarantees.
Choose between a fixed rate (security) and a variable rate (often slightly lower, but more sensitive to fluctuations).

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Energy Costs in Luxembourg

General trends

After years of sharp increases in global energy prices, linked in particular to the pandemic, the war in Ukraine, and subsequent new geopolitical tensions, costs for households in Luxembourg stabilized in early 2026. The war in Iran is expected, however, to shake things up once again.

Fuel and heating oil

According to the latest available data (February–March 2026), prices are as follows:

Super 95: approximately €1.45/liter
Diesel: approximately €1.41/liter

These levels are significantly higher than before 2020 but remain subject to the volatility of global markets.

Heating costs by energy source

The actual cost of heating depends on the system’s efficiency based on the heat source. Here are the approximate costs per kWh:

Heat pump (COP ~3.2): €0.081
Loose pellets: €0.088
Condensing gas: approximately €0.100
Heating oil: approximately €0.099
Bagged pellets: approximately €0.107
Electricity (direct heating): approx. €0.258

Electricity used directly for heating is currently the most expensive solution per kWh of heat actually produced. Solutions such as heat pumps or bulk pellets can be more economical to use, depending on the installation. Today, all newly constructed homes must meet an AAA energy performance rating, which includes the installation of heat pumps.

Key takeaways for your energy budget

Government subsidies continue to help lower bills to some extent: for example, the government covers a significant portion of the costs associated with the electrical grid, which helps reduce rates for households and businesses. This is expected to continue for several years.

Upgrading your heating system or insulation can significantly reduce your energy costs in the long run, beyond just the price of fuel: the efficiency of the equipment and the insulation of your home are key factors.

Don’t hesitate to inquire aboutinstalling solar panels, which are currently eligible for significant government subsidies.

Other Expenses

Here are the household expense categories:

Category	Average expenditure / estimate
Food	€300–€500 per month for a single person (excluding housing)
Internet / mobile	€55–€100 per month
Transport	Free on public transit
Leisure and entertainment	€200–€400
Health care	Partially reimbursed by social security

Ultimately, rent and mortgage payments are the biggest expenses in household budgets, accounting for 38% of income for a couple and 55% for a single person!

Food costs

Food is the second-largest expense for a Luxembourg household. A family of four should budget approximately €920 per month for food. A couple will need €565, and a single person at least €271. This expense accounts for up to 25% of a couple’s budget.

On average, you should budget 25 euros for a standard meal at a restaurant and 3.7 euros for a coffee. A small bottle of water costs an average of 2.8 euros, and a draft beer 5 euros.

At the supermarket, 2.5 kg of potatoes will cost you about 4 euros, and 1 kg of tomatoes or apples 3 euros. A kilogram of ground beef costs 25 euros, a liter of milk costs 1.3 euros, and a dozen eggs costs about 3.8 euros. A bottle of shampoo costs 4 euros and shower gel costs 2 euros.

Leisure expenses

Social life is the third-largest expense category, accounting for about 13% of the budget for all household types.

A movie ticket costs 13 euros. A gym membership costs between 20 and 30 euros per month, depending on the plan. A personal trainer charges over 40 euros for a 30-minute session.

Admission to a museum costs between 5 and 7 euros for an adult. Children and teenagers get free admission.

Transportation Costs

Transportation is the fourth-largest expense, at 421 euros per month for a family of four and 235 euros for a single person.

Public transportation is free in Luxembourg. Luxembourg was the first country in the world to introduce free public transportation in 2020.

Lower prices in Luxembourg compared to neighboring countries

Some products are cheaper than in neighboring countries. This is the case, for example, with alcohol (a 750-ml bottle of crémant costs 7 euros). Cigarettes cost between 5 and 8 euros per pack.

Gas prices range from 1.5 to 2 euros per liter. However, it’s important to note that prices at the pump are strictly regulated by the government and are the same at every gas station in the country.

To better understand the financial implications of moving to Luxembourg, it is essential to find out how expats rate Luxembourg.