Legal Compass Switzerland: Real Estate

1. «Foreign ownership of domestic land»

The Real Estate Acquisition Act (BewG) of 1985 was enacted to prevent the ‘foreign takeover of domestic land’ and provides that persons abroad generally require authorisation to acquire land in Switzerland. Since its entry into force, the Act has been revised and relaxed on several occasions. In particular, the revisions of 1997 (liberalisation of the acquisition of land for business premises), 2002 (relaxations regarding holiday homes) and 2004 (exemption of listed shares in residential property companies from the permit requirement) have gradually opened the Swiss property market to foreign investment.

The situation has changed fundamentally since the Act entered into force. According to the Federal Council, advancing globalisation and the search for secure investments have led to an increasing inflow of foreign capital into the Swiss real estate market. This has resulted in an increase in foreign ownership of land, which is no longer aligned with the objectives of the Property Acquisition Act. At the same time, Switzerland is experiencing significant immigration, strong population growth and a strained housing market. For these reasons, the Federal Council, while recommending rejection of the Sustainability Initiative, has decided to tighten the Lex Koller as one of numerous accompanying measures.

All proposed tightening measures are to be implemented within the framework of Switzerland’s existing obligations under international law. Nationals of EU and EFTA member states residing in Switzerland, as well as third-country nationals (non-EU/EFTA nationals) holding a C residence permit, will continue to be treated on an equal footing with Swiss nationals and will retain unrestricted access to the property market.

2. Overview of the key measures

2.1 Ban on purely investment-driven acquisitions of business premises

Since the 1997 revision, foreign nationals have been permitted to acquire and let business premises, including expressly for purely investment purposes. Furthermore, current law does not impose any quantitative restrictions. This liberalisation formed part of an economic stimulus programme at the time and was intended to promote the creation of new manufacturing and service businesses.

The draft legislation provides that the acquisition of land for business premises by persons abroad for their own business use will continue to be permitted without authorisation and without restriction. However, the acquisition of business premises purely as an investment will, going forward, be subject to authorisation. This will mainly restrict acquisitions for the purpose of letting or leasing to third parties, which in practice would mean that the acquisition of business premises would no longer be possible in most cases.

In addition, an upper limit is to be introduced for the co-acquisition of residential units on land designated for business premises. Accordingly, when acquiring a business premises property, residential units required under local housing quota regulations may be co-acquired without authorisation only up to a maximum of one-third of the gross floor area. This cap is intended to enhance legal certainty and to prevent the unrestricted acquisition of residential units for investment purposes.

2.2 Approval requirement for the acquisition of listed shares in residential property companies, property funds and property SICAVs

Under current law, the acquisition by persons abroad of shares in listed residential property companies, property funds and property SICAVs is exempt from the authorisation requirement. By contrast, the acquisition of unlisted shares is subject to authorisation.

The proposed legislative amendment aims to reintroduce the authorisation requirement for the acquisition of such shares in listed residential property companies, property funds and property SICAVs by persons abroad. In light of the limited grounds on which authorisation may be granted, such acquisitions would effectively be prohibited.

The bill provides that participants admitted to a Swiss stock exchange (exchange participants) must assess whether acquisitions may be subject to authorisation and whether the buyer qualifies as a ‘person abroad’. If the latter cannot be readily ruled out, stock exchange participants would be required to refuse execution of the transaction unless the buyer provides a legally valid authorisation or a declaratory ruling. Any breach of this obligation would expose stock exchange participants to a fine of up to CHF 250,000. These regulations would also apply to persons who carry out off-exchange transactions in listed securities on a commercial basis.

2.3 Tighter rules on the purchase of main residences

Under current law, third-country nationals holding a B residence permit and having their actual residence in Switzerland are not required to obtain authorisation to acquire a flat or a detached house for their own use (a so-called main residence for themselves and their family). If the property ceases to be used as a main residence, there has hitherto been no requirement to sell it. In principle, the property may be let or used as a second home.

In future, the acquisition of a main residence by third-country nationals with their actual place of residence in Switzerland will once again be subject to authorisation. At the same time, the current practice of limiting a main residence to a single residential unit is to be expressly codified in law. A key element of the proposal is the introduction of a resale obligation. By law, permits will be subject to the condition that the property must be sold within two years after the holder ceases to reside in it. Through this measure, the Federal Council seeks to address the housing shortage and curb purely speculative investment in residential property. To facilitate enforcement, the introduction of a reporting obligation is envisaged, requiring the authorities responsible for resident registration to notify the licensing authorities.

2.4 Reduction in quotas for holiday homes

Under current law, the cantons may, by means of cantonal legislation, permit the acquisition of holiday homes by persons abroad. The current annual nationwide maximum of authorization quotas is 1,500 units. In the case of transfers between persons abroad – i.e. where the seller had already obtained authorisation at the time of the initial purchase – the acquisition is not currently counted towards the cantonal quotas.

The Federal Council’s preliminary draft provides for the maximum permissible annual number of cantonal permit quotas for the purchase of holiday homes by persons abroad to be reduced by half, from 1,500 to 750 units. Of the total 750 units, 150 units are to be reserved for cantons that currently do not provide for any grounds for authorisation for holiday homes. Consequently, the Federal Council would, in future, be able to allocate a maximum of 600 units to the remaining cantons. In addition, transfers of holiday homes between persons abroad are to be counted towards the cantonal quotas once again. This measure is intended to make an effective contribution to easing pressure on the housing market and to limit the number of holiday home acquisitions by persons abroad.

2.5 Relief for staff accommodation at hotel establishments

In implementation of the Schmid motion, a legal basis is to be introduced enabling the cantons to provide for an exemption from the authorisation requirement for the acquisition of staff accommodation at hotel establishments. This measure is intended to alleviate the housing shortage and the difficult housing situation for staff in tourist regions. Where such residential units are no longer used to accommodate the hotel’s own staff, an obligation to resell or repurpose them will apply. The Federal Council will regulate the details – particularly with respect to location, number and floor area - at ordinance level.

3. Impact

An external regulatory impact assessment (RIA) commissioned by the Federal Office of Justice takes a critical view of the proposed tightening of regulations. It concludes that the measures are unlikely to materially alleviate pressures in the housing market and may, in fact, risk exacerbating them. This concern is particularly pronounced in relation to large-scale projects, where the de facto ban on investment by foreign investors could reduce the number of property developers. More generally, the RIA finds that investor markets have limited influence on end-user markets, such that no meaningful improvement is expected for the latter. Furthermore, the tightening of regulations could trigger delistings of listed residential property companies and property funds, thereby impairing market transparency and potentially impact Switzerland’s attractiveness as a business location. Notwithstanding these concerns, the Federal Council considers the tightening of regulations to be necessary. It argues, that the current economic situation differs fundamentally from that of the 1990s and that Switzerland is no longer as dependent on foreign capital investment in the real estate sector. Furthermore, land is a finite resource warranting particular protection and cannot be expanded.

4. Assessment

The proposed tightening of the Lex Koller represents a return to its original purpose: to restrict the inflow of foreign capital into the Swiss property market and to ensure that property is once again primarily reserved for the resident population of Switzerland. Nevertheless, the merits of this proposal are open to question. Various renowned experts have expressed critical views on the proposal. In particular, its expected impact on the strained housing market and on immigration is considered to be minimal. Rather, mountain regions in particular would be negatively affected by the planned regulations, as they are often dependent on foreign investment.

Whilst the concessions for staff accommodation at hotel establishments are to be welcomed, as these lead to an improvement in the housing market in tourist areas, it remains doubtful whether the revision can achieve its intended objectives. The proposed changes are unlikely to reduce immigration or materially ease pressures in the housing market. Rather, there is a risk that reduced investment activity in the real estate sector could further constrain supply and thereby exacerbate the housing shortage, particularly given that demand levels are expected to remain high. Equally misguided is the assumption that the planned measures can resolve the issues surrounding immigration. The purchase of property or investments by foreign nationals cannot be described as the primary drivers of the population growth in Switzerland. It further appears that, through the announced changes, the Federal Council is seeking to respond to the SVP’s sustainability initiative (the so-called ‘immigration initiative’). In doing so, it risks negative effects on the market and legal uncertainty. For instance, the new authorisation requirements for stock exchange transactions involving foreign investors give rise to practical ambiguities. The associated risk of fines for stock exchange participants could, in the worst case, have a ‘chilling effect’, resulting in even fewer transactions being carried out.

Despite these concerns, it is not unlikely that this bill will secure a majority in Parliament, given that the two major polarising parties (the SP and the SVP) support a tightening of the Lex Koller. The consultation period runs until mid-July 2026. Following this, the Federal Council will draft a message for Parliament. It remains to be seen whether the draft will be moderated and refined during the subsequent legislative process.