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21 Nov 2015, 04:44
Kudos
Bookmarks
Hi folks,
Any feedback (and indicative score) would be massively appreciated!
ESSAY QUESTION:
The following appeared in the personal finance section of a popular magazine:
“The average price of an acre of land in the United States is now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation’s population is projected to keep increasing, even as the amount of land remains constant. Therefore, people who are approaching retirement should invest heavily in real estate in order to ensure their financial security.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
YOUR RESPONSE:
There seems to be a strong argument here that would indicate potentially huge returns on investment. Global cities such as Tokyo are examples of the argument that the value of land will increase as the population increases. Tokyo is very densely populated, to the point where the Japanese government has extended the coast to build more, artificial land from nearby mountains. This exemplifies the notion of supply and demand. Such limited supply will soon give rise to over-demand which inevitably drives prices up.
So, whilst this argument holds some merit, it is limited and somewhat deceptive in the information it provides. Firstly, it has not factored in inflation since 1920 and 1970, which would result in much more modest increases in the value of land. The argument also looks at the US in its entirety, despite there being vast differences in rural and urban land value. For example, even after the most recent housing bubble, land value in New York City continued to rise while the majority of the rest of the country saw a decline in land value. Even now, cities like New York and San Francisco are experiencing huge growth in land value in comparison the area like Detroit, where land value remains low. Real estate is generally considered a long-term investment. The article claims that 'people who are approaching retirement age' should invest. This would indicate that these people will have little time to see a return on investment and therefore are not in prime position to benefit from real estate investment as generations behind them.
Finally, interest rates need to be considered; will the increase in property value move faster than the interest being paid by the buyer? A deeper analysis on the current state of US mortgage rates must be taken into account to provide a more robust understanding on ROI potential.
In conclusion, the argument cannot be refuted, however, a much deeper analysis must be done, and some of the information becomes arbitrary when used in isolation. So to give this argument more weight, things like inflation, interest rates and geographical breakdown must be presented to convince us that this investment in worth making.
Any feedback (and indicative score) would be massively appreciated!
ESSAY QUESTION:
The following appeared in the personal finance section of a popular magazine:
“The average price of an acre of land in the United States is now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation’s population is projected to keep increasing, even as the amount of land remains constant. Therefore, people who are approaching retirement should invest heavily in real estate in order to ensure their financial security.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
YOUR RESPONSE:
There seems to be a strong argument here that would indicate potentially huge returns on investment. Global cities such as Tokyo are examples of the argument that the value of land will increase as the population increases. Tokyo is very densely populated, to the point where the Japanese government has extended the coast to build more, artificial land from nearby mountains. This exemplifies the notion of supply and demand. Such limited supply will soon give rise to over-demand which inevitably drives prices up.
So, whilst this argument holds some merit, it is limited and somewhat deceptive in the information it provides. Firstly, it has not factored in inflation since 1920 and 1970, which would result in much more modest increases in the value of land. The argument also looks at the US in its entirety, despite there being vast differences in rural and urban land value. For example, even after the most recent housing bubble, land value in New York City continued to rise while the majority of the rest of the country saw a decline in land value. Even now, cities like New York and San Francisco are experiencing huge growth in land value in comparison the area like Detroit, where land value remains low. Real estate is generally considered a long-term investment. The article claims that 'people who are approaching retirement age' should invest. This would indicate that these people will have little time to see a return on investment and therefore are not in prime position to benefit from real estate investment as generations behind them.
Finally, interest rates need to be considered; will the increase in property value move faster than the interest being paid by the buyer? A deeper analysis on the current state of US mortgage rates must be taken into account to provide a more robust understanding on ROI potential.
In conclusion, the argument cannot be refuted, however, a much deeper analysis must be done, and some of the information becomes arbitrary when used in isolation. So to give this argument more weight, things like inflation, interest rates and geographical breakdown must be presented to convince us that this investment in worth making.
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