The government says it wants to liberalise Switzerland's property laws, to make it easier for foreigners to buy homes in the country.
The cabinet called on parliament on Wednesday to scrap the so-called Lex Koller legislation, designed to limit the number of foreign residents owning property in the country.
In a statement, the cabinet said the legislation was outdated, and scrapping it would boost the economy.
The proposal is now subject to a consultation process. Interested parties and stakeholders have four months to comment on the suggested change.
The government argued that once the law had been liberalised, nothing would stand in the way of non-residents purchasing land for building, houses or apartments as investment vehicles.
It said this would create jobs and increase the supply of rental properties, since there is currently a shortage in many parts of the country.
But it added that uncontrolled development in the market for second homes had already had negative consequences in some mountain resorts, leading to urban sprawl.
The cabinet said improved land-use planning measures were a better way to combat the problem than excluding foreigners from the market.
The environment ministry has proposed a change to the federal law on land-use planning, which would require affected cantons to designate areas threatened by unchecked property speculation.
The Federal Office for Spatial Development favours limiting the percentage of second homes in popular tourist regions to between 30 and 50 per cent.
To grant the cantons sufficient time to adapt their legislation, the government said Lex Koller should only be scrapped three years after the new land-use law comes into effect.
swissinfo with agencies
The number of holiday properties in Switzerland has almost doubled since 1980, from 240,000 to 420,000 in 2000.
Twelve per cent of all properties in Switzerland are used as holiday accommodation.
In cantons Graubünden and Valais 37.1% and 35.7% respectively of the total number of properties are used for holidays.
Valais has a total of 61,614 such properties.
Under the so-called "Lex Koller", foreigners must receive governmental authorisation to buy real estate in Switzerland if the property involved is not a permanent establishment.
The government proposed abolishing the "Lex Koller" in January but said that planning laws should be revised.