Who should be allowed to buy Swiss property? Lex Koller battle heads to the Senate

Switzerland’s upper house is next to consider tighter restrictions on property purchases by people abroad, after the National Council backed a proposal to strengthen the Lex Koller law. An unusual alliance of the Swiss People’s Party, Social Democrats and Greens supports the move. The clash between Social Democrat Jacqueline Badran and Liberal MP Beat Walti reveals the divide: she wants more protection for scarce land; he wants greater flexibility over its use.

For Switzerland’s residents, the debate touches on a fundamental question: how can housing remain affordable? Badran sees tighter purchase rules as a safeguard against pressure from foreign capital. Walti argues that excluding investors is the wrong response when denser development could deliver more homes. They are discussing the same scarce resource, but drawing opposite political conclusions.

A law with a long history

The Lex Koller governs the conditions under which people abroad may acquire land and property in Switzerland. Officially the Federal Act on the Acquisition of Immovable Property in Switzerland by Foreign Non-Residents, it came into force in 1985. Its predecessors date back to the 1960s.

Badran points particularly to the Lex von Moos of 1961. “It was a brilliant idea and incredibly visionary,” she says of that early approach. She describes widespread speculation in the 1950s and a political response intended to tie property ownership to living in Switzerland.

She insists on a distinction: “It is not about foreigners, but about people abroad.” The debate is therefore not simply about who holds a Swiss passport. It concerns the conditions under which people and capital from outside Switzerland should gain access to its property market. Existing rules distinguish between legal status and types of purchase; they are not a blanket ban on foreign nationals buying property.

That distinction matters for international residents trying to understand the debate. Nationality alone does not capture the question being argued in parliament. Badran, who also sits on the board of the Swiss Tenants’ Association, believes successive relaxations of the Lex Koller over recent decades were a mistake. She wants its protective role strengthened again.

Scarce land, or more flexible use?

Badran starts from the premise that land cannot be reproduced. “You cannot create more land, end of discussion. That makes land the most distinctive of all asset classes.” In her view, property cannot be treated like goods that can be manufactured at will: additional demand meets a geographically limited resource.

Walti challenges that emphasis. The Liberal MP chairs the Swiss Property Association, representing institutional investors including pension funds, insurers and private property companies. He shifts the focus from the amount of land available to what may be built on it.

“What actually matters is land use,” Walti says. His answer is densification: more homes can occupy the same area if planning rules allow it. He argues that demand can be met by defining permitted uses accordingly. He therefore sees no reason to shut investors, or the share of capital coming from abroad, out of the market.

These positions involve different interventions. A tougher Lex Koller would restrict access to ownership; densification changes what can be built. More floor space does not create more land, but it can increase the housing supply. Equally, a purchase restriction alone does not create another home. The political dispute is over which approach would more effectively ease pressure on Switzerland’s housing market.

What tenants’ experiences reveal

Badran and Walti also disagree about how well the existing market works. Walti points to a residential turnover rate that has remained at 12 to 14 per cent for a long time. He regards this as evidence that supply and demand continue to function.

Badran uses a different measure: rents. In her view, low interest rates should have brought substantial rent reductions. That did not happen, leading her to conclude that the property market is not functioning properly.

For tenants, the distinction matters. Being able to move home and being able to find a suitable home at an affordable price are not the same thing. Those observations alone do not establish how much a stronger Lex Koller would affect housing costs.

They do, however, reveal the standards by which the two politicians judge their policies. Walti emphasises movement within the market; Badran looks for financial relief for tenants. The disagreement is therefore about both the proposed remedy and the evidence used to assess whether the market is working.

A tougher test in the upper house

The Federal Council, Switzerland’s government, put a tightening of the Lex Koller out for consultation in April. On 22 September, a majority comprising the Swiss People’s Party, Social Democrats and Greens backed the proposal for stricter rules in the National Council, the lower house of parliament.

That alliance is politically striking. Protecting the Swiss property market has brought together parties that frequently disagree on other economic questions. Yet their lower-house majority does not settle the outcome.

The Council of States, Switzerland’s upper house representing the cantons, must now consider the proposal. Tighter rules are likely to face a harder passage there because the Centre and the Liberals are more strongly represented than in the National Council.

Approval by the larger chamber therefore does not yet amount to a change in the law. The immediate question is whether a majority in the Council of States will also support stricter access to Swiss property.