Is life really so expensive in Luxembourg?

The cost of living may be high in Luxembourg but is it fairly high compared to many of its European neighbours, as some are claiming? As usual, the answer must be qualified. If you only take into account housing, food or clothing, Luxembourg is not exactly the cheapest one but on a daily basis, the country is far from being one of the most expensive in Europe.  

Based on 2,398,000 prices updated almost every day and entered by 267,500 contributors, Expatistan is a collaborative international cost of living index which compares the cost of living between 255 countries and between 2,269 cities in the world. In the world price index established by Expatistan, Luxembourg ranks 14th, far behind the leading countries comprising Bermuda, Iceland, Switzerland and Norway. Compared to its European neighbours, the cost of living in Luxembourg is 19% and 17% more expensive than in Belgium and Germany and about the same as in France, the United Kingdom and the Netherlands. 

Not in the top ten most expensive cities in the world

Expatistan also reveals that Luxembourg City, where the majority of expats and newcomers are living, is not so expensive if you compare to other cities in the world. The capital city ranks 34th in the world price index – Hamilton (Bermuda), Reykjavik (Iceland), Geneva (Switzerland) and San Francisco (United States) have the higher cost of living – and 13th in the Europe price index. Cities such as London, Oslo, Dublin, Paris, Copenhagen and Amsterdam are more expensive than Luxembourg City (respectively 29%, 27%, 15%, 13%, 11% and 6%). Even if you use other sources such as the Worldwide Cost Living Report 2018 by the Economist Intelligence Unit or the Mercer 2017 Cost of Living Rankings, Luxembourg City remains out of the top ten most expensive cities in the world and in Europe[1].

Of course, this does not mean that the country is rather cheap. It is a fact that the prices of consumer goods and services – especially in Luxembourg City - are at a fairly high level, and above the European average. According to Expatistan, if you compare to cities such as Amsterdam, Paris, London, Brussels and Berlin, you pay more in Luxembourg City for personal care, food (restaurants and groceries), clothes and housing (except for Paris and London where prices are 7% and 18% higher).

Lower prices in some areas

On the other hand, the level of wages is comparable. The minimum wage of € 1,998.59 a month (2017) and the average net salary of € 46,731 (2017) in Luxembourg are the highest in Europe. It is therefore not surprising that the Grand Duchy has the highest purchasing power per inhabitant in the European Union: € 30,499 against € 22,239 in Germany, € 19,537 in France and € 19,198 in Belgium (Gfk Purchasing Power Europe 2017). The healthcare system in Luxembourg might be more expensive than in the neighbouring countries but it is one of the best in Europe and works on the basis of reimbursement, which varies from 80 to 100%! In addition, there are some areas where prices in Luxembourg are lower than on average: alcoholic beverages, tobacco and consumer electronics (televisions, smartphones, DVD players, cameras, etc.). Transportation, including personal cars, fuel and public transport, is also very cheap in Luxembourg in comparison to other European countries: from -19 to -33% on average compared to Belgium, France and Germany.

If childcare costs may be very high in Luxembourg, it is not the case for the education system. The majority of schools in the country are run by the state and free for all the residents registered on the social security. Of course, if you choose private or international schools, you have to reach for your wallet[2]. According to the Euridyce network of the European Commission in its 2017 annual report, university fees in Luxembourg are in line with the EU average - between € 400 and € 800 per year for the first cycle and € 400 per year for the second cycle. In addition, the Ministry of Higher Education and Research provides a basic grant of € 2,000 per year to all students (€ 2,450 per year to students who attend higher education in another country) and about 62% of resident students received need-based grant in 2014/15 (between € 1,000 and € 3,800 per year). In comparison, students in England pay much higher fees (around € 10,000 per year for the first cycle) and no grants have been available for new entrants since September 2016.

So, is Luxembourg really expensive? No for one single reason: people in Luxembourg are more satisfied with their lives than the OECD average, says the OECD Better Life Index in its last issue, and this is priceless ;-).

[1] In contrast, the world top 3 ranking cities are not the same: Singapore, Paris and Zurich for the Intelligence Economist Unit; Luanda, Hong Kong and Tokyo for Mercer.

[2] More information in our article “In which school should you place your children?”.

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