The cut-glass art deco chandeliers are still in place, but the wallpaper is flaking and the floors covered with debris: everything from broken glass to old menus from its restaurant, Le Panoramic, and newspapers from 1942 with news of the war in Europe.

If you were on a film set, the chandeliers might suddenly sparkle into life, the music would start playing and women dressed like Isadora Duncan would glide effortlessly down the marble staircase. Sadly, this is real life and it is taking 2½ years and the efforts of about 200 people to transform the hotel into luxury flats, that for the first time will give non-Swiss residents an opportunity to buy on Switzerland’s Riviera.

The National was built in 1873 to cater for tourists, among them many rich British visitors who came to the region for the lake and fresh air. As the first hotel to be built in the town, it is in one of the area’s best locations, with fine views over the lake and mountains.

Montreux itself is a charming town that has the dubious distinction of hosting the first official Eurovision television broadcast in 1954. Since then, its music reputation has soared. It now hosts the world-famous Montreux Jazz Festival, whose performers last year included Sting, Quincy Jones and Santana, and several other themed musical festivals every year. Thanks to all that action, and its location on the lake, just 20 minutes from the nearest ski slopes, property prices are at least 25% higher than they are in nearby Vevey.

“Montreux is a brand,” says Sean Collins, managing director of Pure International, agents for the project. “Switzerland has only a handful: Verbier and St Moritz, for example. Like them, Montreux is synonymous with luxury and high-quality service.”

A total of 77 flats, ranging in price from £300,000 to £3m, will be constructed at the National. One of the £3m pads has already been snapped up by a Chinese woman from Shenzhen province.

An Englishman signed up last week for one of the medium-sized apartments. “He bought it blind,” says Collins. “He is a seasoned investor and saw no reason to wait. Because of the unique nature of this project, I think we’re going to see a lot of interest very early on and we’ll be oversubscribed.”

Seventeen flats will be located within the National building itself; the others will be in three new cube-shaped blocks, placed to the left and right of the hotel, with one slightly behind it. They will be modern, but will have the traditional yellow shutters of the region to blend in with the hotel building. Collins says the aim is to “combine traditional and contemporary living”.

“It is a truly special project for the city,” says Evelyne Lüthi-Graf, an art historian and head of Montreux’s archives. “The National is a very important piece of our history and it is wonderful that someone has finally come along to restore it.”

Even the property developer in charge of the project, Blaise Carroz, is sentimental about the old hotel. “She is like an old lady,” he tells me, as we wander around the kitchen, which still smells of oil. “She is waiting for someone to take care of her, to give her back her dignity and usefulness.”

Buyers need to put down a SFr100,000 (£42,000) refundable fee, followed by a 20% deposit on signing (less the initial fee). The balance is payable on completion. Mortgages are cheap, with 10-year fixed rates at 3%.

That outsiders can buy at all in Switzerland is a relatively new phenomenon. Until the law was changed in 1999, only Swiss residents were allowed to own property.

It is still a long way from the free-for-all found in most other European countries, however. A limited number of property permits are granted to non-residents each year and only certain properties — primarily those in tourist areas — are eligible. Switzerland being a highly decentralised country, the rules vary considerably from canton to canton.

The canton of Vaud, in which Montreux lies, is one of the most welcoming to foreigners, but even here there are restrictions. Strictly speaking, outsiders are not allowed to buy any property larger than 200sq m — which means the biggest flats are out of bounds unless you become a Swiss resident (a far from straightforward process in itself). You are also not allowed to buy more than one.

Nor is Switzerland quite the tax haven some believe it to be. Income tax is levied on the proceeds of renting out the property — or on the rent it would have generated, even if it is not actually let out. Buyers are also liable for a wealth tax on assets held in Switzerland and a tax equivalent to one-thousandth of 1% of the property’s value. Collins reckons these will probably add up to about 1% of the property’s value each year.

JMW Turner, the artist, was one of the first visitors to the National hotel to appreciate its beauty: he painted a series of watercolours from its garden. Other illustrious visitors to the town include Stravinsky, Tchaikovsky, Byron and, more recently, Freddie Mercury, the late singer with Queen who spent many of his last years here. The town has put up a statue of him overlooking the lake. In fact, he shares almost the same view as the National’s new buyers.

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