In April, the Federal Council opened the consultation process on a stricter version of Switzerland’s “Lex Koller”, the law governing foreign ownership of real estate. Under the proposal, foreign investors would no longer be allowed to purchase shares in listed real estate companies or real estate funds. (They are already prohibited from buying residential property directly.) The measure is justified by concerns that Swiss land is being used by foreign capital as an investment vehicle – and, heaven forbid, a speculative one.
The proposal rests on an assumption that is as widespread as it is questionable: that the identity of a property owner – whether defined by nationality or by legal form, such as an individual versus a corporation – has a significant impact on the rents that tenants pay. Spoiler alert: ownership does matter, but not in the way lawmakers assume.
What Determines Rent – and What Doesn’t
Rent is the price paid for the use of housing space. That price is determined where the supply of usable square footage meets demand: in the market for space.
Whether a property is owned by a Geneva pension fund, a German insurer, or an individual from the Emmental has little immediate bearing on that price. A foreign owner cannot simply charge above-market rents without risking vacancies. Nor is an owner likely to charge substantially less than the market will bear.
With this proposal, the Federal Council is fishing in the same murky waters recently explored by the Trump administration in the United States. There, policymakers sought to prohibit institutional investors from purchasing single-family homes for rental purposes, arguing that their market power was reducing housing availability and driving up rents.
Economic research paints a different picture. Homes purchased by institutional investors do not disappear from the housing market; they shift from owner-occupied housing to rental housing. Moreover, large institutions typically manage extensive portfolios more efficiently and at lower cost than small-scale landlords. On balance, institutional ownership has tended to reduce housing costs rather than increase them.
Less Capital, Higher Rents
The implications extend beyond the housing market itself. Publicly traded equity is an effective mechanism for spreading real-estate risk across a broad base of investors. Restrict that transfer of risk, and exposure becomes increasingly concentrated within Switzerland’s domestic mortgage banks rather than diversified internationally. The result is a larger concentration of risk within the Swiss financial system.
More broadly, new or unexpected restrictions on property rights of the kind proposed by the Federal Council can have significant market consequences. They make the economy less predictable, less reliable and, in short, less Swiss. In the United States, the original legislative proposal was eventually diluted substantially in Congress. What began as a de facto ban on institutional purchases evolved into a much more modest regulatory framework. All the more reason to expect Switzerland’s Federal Council to focus on the actual causes of housing scarcity – above all, insufficient construction – rather than applying pressure at precisely the wrong point in the system.
This article was first published in the newspaper “Finanz und Wirtschaft” on July 13, 2026.
