An increased tax on foreign buyers in British Columbia may create more demand from wealthy Chinese investors and homebuyers who are looking to purchase property in Washington state.

B.C. Finance Minister Carole James announced a 20 percent tax on listing values for foreign buyers. It's an effort to loosen the demand and make it easier for domestic purchasers to get into the housing market and create more affordable living.

The side effect of the new tax makes other west coast cities like Seattle a more intriguing option. But many worry that will only put further strain on the housing market where supply is already well short of demand.

"I think we're just starting to see the inbound investment trend coming ashore, and my concern is that it's being added to the domestic demand, which is firing on all cylinders," said Dean Jones, president of Realogics Sotheby's International. "Developers are left playing catch up."

While government policy makers in Vancouver try to curb the demand from international buyers, mostly from China, the lack of government action to address the Washington state Condo Act is hurting supply of new condo developments.

The law makes it easier for condo owners to sue developers for construction defects.

"We already don't have the supply to meet all the demands," said Eddie Chang, real estate specialist with Realogic Sotheby's. "I already have a client that's been looking for something over a year."

Chang and others are lobbying for changes to the state Condo Act which is designed to protect tenants. But in turn, has created a disincentive for developers to build more condos and add to the supply issue.