Abstract: Calculation of cost of capital for an industry,especially for China’s real estate industry is very critical.This would provide an important benchmark for both investors of the industry and the firms in the industry.This paper firstly reviews the theory of cost of capital,and uses CAPM to achieve the result that the cost of capital of real estate industry in China is around 12.44%.Based on this outcome,we tentatively try to answer whether there are "bubbles" in China’s real estate development:if the real return is less than 12.44%,but cash flow is still rushing into the industry,we could tend to think there exist "bubbles".

Key words: cost of capital, CAPM, real estate industry