Joined: 18 Nov 2011
GMAT 1: 700 Q50 V35
WE: Business Development (Manufacturing)
, given: 2
Need feedback on "Analysis of Argument" [#permalink]
04 Mar 2012, 10:25
I'm just 1 week away from writing my GMAT. Need your feedback on this analysis:
The following appeared in The Homebuilder magazine, a local publication with a focus on construction and sale of real-estate properties:
“According to the most recent survey of our readers, nearly 70% of the respondents indicated that they are planning to build or purchase a new home over the next 2 years. These results indicate that the growth in the construction industry is likely to accelerate in the near future. Therefore, this industry continues to offer lucrative opportunities for investment.”
Discuss how well reasoned you find this argument. Point out flaws in the argument's logic and analyze the argument's underlying assumptions. In addition, evaluate how supporting evidence is used and what evidence might counter the argument's conclusion. You may also discuss what additional evidence could be used to strengthen the argument or what changes would make the argument more logically sound.
The argument states that because 70% of the respondents have planned to build or purchase a new home over the next 2 years, it will accelerate the growth in construction industry and provides opportunities for investment in the mentioned sector.
In the above reasoning the author assumes that just because of the interest of people in building their own homes or even purchasing one, it will drive the growth in this sector. He assumes that the customer perception is the only factor that will drive the growth in the construction industry.
However, he fails to consider the following aspects to come to a conclusion:
1). Do these respondents currently have any property / houses of their own? It is important to know because it shows the priority of these people to get a new home. Are they looking for holiday homes, or primary homes. If they are looking for primary homes, it might be a sign of growth, but if they are looking for holiday homes, it is important to know what is the priority for that
2). What signs are shown by the economy (Like interest rates, growth of economy, etc.). If the economy has not shown positive signs (Like how it did during the 2009 crisis). If the current interest rates are not much but they are going to rise significantly during these 2 years, pleople may shun their plans to buy a new home.
3). Is there enough scope to offer newly build homes for these respondents or there are enough options of refurbished / Second Hand Homes? If there are good options of refurbished homes available to the respondents, they might go for it, and not opt for a newly built home, thus bringing the proposed investments to get lower returns.
4). How is the repayment capacity of these respondents? If the respondents are not capable of paying the loans, it might disrupt the full system, and thus fail any kind of investment.
However, if these points are considered adequately, and still if there are positive signs, then it might be a good investment opportunity. It is also important to consider what other factors are responsible for the growth of this industry, like the land rates, the taxes, etc.
Please evaluate as to how good this response it, and where do i need to improve.