“New arrivals are shocked that they will have to pay the equivalent of five months.”
Photo: Mike Zenari (archives)
Attracting staff from abroad to fill the local skills gap is made harder by Luxembourg’s ever-tightening housing market. However is it really a major problem, and is this the biggest impediment to encouraging people to move here?
No question housing is expensive in Luxembourg, but it is not markedly different from other high-growth business centres.
The average rent for a three-bedroomed apartment is €2,171 in Luxembourg, according to online estate agent AtHome, while the median household disposable income was around €5,000 per month in 2017, say Statec. The rule of thumb is that housing costs should equate to about a third of disposable income. The ratio of these averages is 43%: a high figure but not outrageous by international standards. Moreover, skilled, experienced professionals earn substantially more than the average, so for them these costs are well within bounds.
City more expensive
Of course things get trickier in the city. For a place in the most desirable neighbourhoods the average for a three-bedroom flat goes from €3,059 per month in Limpertsberg and €2,683 in Belair on the upper end, to €2,367 on the Kirchberg and €2,400 in Weimershof in the mid-range, to €1,800 in the Grund and Eich at the lower end.
If you’ve ever wondered why cross-border workers spend hours a week travelling to work here, it’s because the same sized homes in Thionville, Metz and Trier cost less than one-third of the Luxembourg average. All figures are from AtHome.
Expectation management is important. “People can assume Luxembourg’s prices will be lower than in major capitals, but if new hires are informed early enough, then they have time to explore cheaper options,” said Stéphane Compain, CEO of the relocation firm LuxRelo. He noted that the south of the country is growing in attractiveness. This is related to firms opening offices there, as well as the advent of new English language schooling in the area.
Yet even if people consider the price, there can be some other nasty surprises. “Very often new arrivals are shocked that they will have to pay the equivalent of five months’ rent straight away: the first month’s rent, the agency fee, then the bank guarantee worth two or three months,” Compain added.
Yet he finds that it is not housing costs that can be the deal-breaker, but the lack of schooling options. He points to the main English language schools in the city being particularly difficult to access, and that even the English-language schools in the Luxembourg state system require kids to be at least bilingual. “That’s a real stress for families and it can result in people deciding not to come,” he said.
Worse for low earners
However the bigger concern might be attracting and retaining people who earn lower incomes. A minimum monthly wage of €2,071 gross might look attractive, but less so after tax, social security and €700 rent for a room in the city are subtracted. Population growth continues to outstrip supply and it has to be a concern that the resultant rising housing prices could harm the country’s growth potential.