While the average size of housing in the UK went down considerably the average 3 bed room flat is still 950sqft, land attached houses are on average 25% larger than flat with the same number of bedrooms not counting external land area like balconies and yards.
People need their space while it's true that there might be some "romantic" aspects to small housing the disadvantages are quite noticeable there are plenty of adverse physical and mental health effects when you live in smaller spaces, from asthma to mental stress and social friction that can increase the likelihood of divorces and breakups.
I live with my GF for 6 years and I would never ever live in an apartment with less than 2 bedrooms, people need their space, if you have a fight it's good to have a place to go and just cool down and not continuously get annoyed at the person, having a guest bedroom/office is also quite good for that time where you under allot of stress at work or just having a bad day and need to finish some things without being disturbed.
And while It's perfectly fine to say to your partner "look, I'm having a rough day and I need to be alone" it's just much better when you don't have too, when you know you can sit down some where and just relax.
Having larger space also gives people privacy which even in a relationship is very important if the 2nd bedroom door is closed my GF knows to knock, if our bedroom door is closed I know to knock. And before some one makes jokes about it no we don't expect to catch one of us with the mailperson in there but she might be having a private call with her parents or doctor, she might be planning a surprise and i can do the same.
And while you can do those things even without having an extra room by juggling your schedule the fact that you don't need too adds quite a bit of relief, I've seen other couples having issues while living in small apartments from having to lock yourself in the bathroom after a fight to having to make personal calls from it or worse have to say "hon, I need to make a call so I'm going out for a few" which is just uncomfortable for both people because even in a trusting relationship having a private call inside the house gives the added assurance that it's probably not that, while when you need to go out to make it there might be some fears gowning at your partner even if they are completely subconscious they are still there.
People need their space,calling it a luxury and that people in "Insert European, 2nd world, 3rd world country here" are living in small spaces is not true, because in many of them the overall living space tends to be much much bigger than what people would imagine, especially when you count in communal and open spaces.