Even so, investing in Swiss real estate involves navigating regulations often misunderstood by foreign investors. Lex Koller, a federal law that governs property ownership by people who don’t live in the country, is at the heart of these regulations.
This article provides a practical overview of Lex Koller, what it means for investors who aren’t Swiss residents, the rules that apply to each canton, and where special purpose vehicles (SPVs) fit in. It also discusses the challenges and opportunities for prospective buyers aiming to stay compliant.
What is Lex Koller?
The Federal Act on Acquisition of Real Estate by Persons Abroad, which was passed in 1983, has been also known as Lex Koller since its last major revision in 1997 when Arnold Koller served as President of the Swiss Confederation. Its main goal is to limit foreign ownership of real estate in Switzerland so that housing stays affordable for Swiss people and people don’t buy homes just to make money.
Lex Koller makes a distinction between:
- Swiss citizens and residents: Generally free to buy property.
- Foreigners who don’t live in Switzerland: Subject to strict controls and often need permission from canton authorities.
The law applies to homes, land zoned for building, and some types of commercial real estate in some situations. Different cantons have interpreted and enforced Lex Koller in different ways over time, making it hard for foreign investors to comply.
How Lex Koller Affects Investors Who Don't Live in Switzerland
In summary, Lex Koller has three primary implications for foreigners investing in Swiss real estate:
- Limitations on primary residences. Non-residents usually can’t buy Swiss homes for personal use. There are exceptions for properties in designated commercial zones or tourist areas that are approved for second homes.
- Limits on investment properties. Non-residents can’t just buy apartments in cities like Zurich, Geneva, or Basel that are in high demand for rental or speculative investment. In many cantons, only a few new buildings can be bought by people from other countries.
- Every foreign transaction needs to be approved by the cantonal authorities. The reviewers look at whether the purchase has a good economic reason, like boosting tourism in the area, or whether it could make the housing shortage even worse.
- The law can seem like a headache for high-earning non-residents who want to buy Swiss real estate. Fortunately there are fully legal ways for foreigners to invest while staying compliant.
SPVs and Other Solutions for Foreigners
Using special purpose vehicles (SPVs) is one of the best ways for investors who don’t live in the area to invest. SPVs are businesses that own certain things, like real estate. Lex Koller lets non-residents indirectly buy real estate by putting money into a Swiss company that owns property.
Why Lex Koller allows SPVs to work:
- Technically, ownership is corporate, not personal.
- Local directors or management structures can help meet Swiss legal requirements.
- SPVs can bring together a number of investors, which lowers the amount of money each one needs to invest.
SPVs also let foreign investors buy urban residential and commercial properties without having to deal with the same rules as direct ownership. An increasing number of platforms, including crowd-investing sites like CapiWell, support the adoption of these foreigner-friendly structures.
Example: Let’s say you live in Germany and want to put CHF 200’000 into an apartment building in Zurich. You can’t buy directly. In Switzerland, an SPV is set up to own the property instead. You buy shares in the SPV and you get a share of the rental income and the chance to benefit when the value of the shares goes up. Everything here is legal: the SPV is Swiss, so Lex Koller does not limit what it can do.
Canton-specific restrictions
Lex Koller is a federal law, but different cantons enforce and interpret it in different ways. Some cantons are very strict, while others are more flexible.
- Zurich
Zurich is one of the cantons that makes it hardest for people who don’t live there to buy a home. It’s not common for foreigners to receive permission to buy residential units in central Zurich. Commercial real estate, redevelopment projects, or SPV ownership are more promising routes. - Geneva
Geneva has strict rules because there is a lot of demand and not a lot of space. There are strict rules about second homes, and it’s hard for people who don’t live there to get permission to buy. You may have better odds with tourist or hospitality projects, but it’s almost impossible to buy a home for yourself. - Basel
Basel is a little more flexible than Zurich or Geneva, especially when it comes to commercial or mixed-use developments. Residential properties owned by non-residents are quite rare, but SPVs are often used to pool foreign money for local rental properties. - Lausanne and the Vaud Canton
Lausanne’s rules are not too strict. Some new homes in certain areas may be open to foreign investors with permission from the government. SPVs are a popular alternative option. - Other Cantons
Tourist-heavy areas like Graubünden and Valais only let people buy a second home in certain places.
In general, permits to purchase in rural or less densely populated areas are easier to obtain, but the potential for growth is lower than in cities.
What Foreign Investors Should Do
If you don’t live in Switzerland, you need to plan carefully before buying Swiss real estate. Here’s how to do it step by step:
- Know what you want to do. Decide if your goal is to make money from rent, increase the value of your property, or both. This helps you figure out whether an SPV (or other business structure) makes sense and which one to choose.
- Check the restrictions in the canton by getting in touch with the canton where the property is. Check to see if the property can be owned by someone from another country and what permits are needed.
- Think about SPVs or corporate ownership. SPVs let foreign investors pool their money and legally buy Swiss residential and commercial property. Make sure the SPV is set up correctly with Swiss management and governance.
- Focus on projects that follow ESG rules or are for business. Hotels, co-living spaces, and energy-efficient buildings usually have fewer rules to follow. Some cantons put these kinds of developments at the top of their list of things to approve for foreign investors.
- Get advice from lawyers and tax experts. Swiss property law is complicated. Investors who don’t live in the country need to know about both Lex Koller and cantonal tax laws. There may be corporate tax issues with SPV structures that need careful advance planning.
SPV Risks
Foreign investors still face unique risks, even with SPVs or other corporate structures:
- Uncertainty about approvals: Cantonal authorities have the final say on approvals. Projects could be turned down or put on hold.
- Liquidity constraints: While easier to sell than traditional real estate, shares in SPVs (or other forms of fractional real estate investment) are usually harder to sell than assets that are traded on the stock market.
- Higher costs: Legal, business, and administrative fees can lower net returns.
- Changes in the market: Urban Swiss real estate is strong, but economic or currency fluctuations can affect returns.
Lex Koller and Investment Strategy
For foreign investors, Lex Koller should factor into investors’ real estate strategies:
- For urban markets, focus on SPVs: It’s almost impossible for foreigners to own property directly in Zurich and Geneva, but SPVs make it possible to do so indirectly.
- Vaud (Lausanne), some tourist areas, and rural cantons may allow non-residents to own properties. These areas are the best places to buy directly.
- Put ESG and redevelopment projects first: Swiss cantons favor tourism infrastructure and sustainable development and are more likely to give approval to foreign investors in such projects.
- Consider diversifying: Mixing urban SPVs with rural or second-home investments can help you grow your capital, make money from rent, and follow the rules.
SPV Case Study
Let’s say a German investor wants to get into the Zurich real estate market without breaking Lex Koller:
- The investor finds a residential project in Zurich West.
- A Swiss SPV is set up to buy the property. There are directors from Switzerland and a professional local management team put in place.
- The investor buys SPV shares. Rental income is shared fairly, and capital gains build up at the SPV level.
- The SPV is compliant with Lex Koller. The investor’s place of residence does not influence the legality of the structure in Switzerland.
- This approach is becoming increasingly popular, and it lets foreign investors take part in Switzerland’s best markets without breaking any rules.
Final Thoughts
Lex Koller is still an important part of Swiss property law. It protects the housing markets in Switzerland while limiting foreign purchases that are just for investment purposes. For investors who don’t live in the area, owning a home directly in major cities like Zurich and Geneva is hard. In Lausanne, it’s not as hard, and in some tourist areas, it’s a little easier.
However, foreign investors can buy Swiss real estate in compliance with Lex Koller if they plan carefully. SPVs, corporate structures, and projects that focus on ESG are all ways to legally participate in the real estate markets of Zurich, Geneva, Basel, and Lausanne.
Swiss real estate is still one of the best places in Europe to invest if you’re a foreign investor who is willing to deal with cantonal rules, understand the legal details, and work with experienced advisors. Platforms that make it easier to own SPVs make the process even easier by allowing fractional ownership and access to institutional-grade assets.
In short, Lex Koller presents a challenge – but not an insurmountable one – for foreign investors who take a strategic approach to owning Swiss real estate.
