Undersizing is the failure people notice. A tank that runs out mid-shower, or a continuous flow unit that goes lukewarm when a second tap opens, is a daily irritation that no amount of explaining fixes. It is also the harder mistake to correct, because the answer is usually a new system rather than an adjustment.
Oversizing is quieter and it is not free. A larger storage tank holds more water at temperature all day whether anyone uses it or not, and standing heat loss is a real running cost on an electric or gas tank. It also takes more space, costs more to buy, and on a heat pump can mean a physically larger unit in a position that was already tight.
There is a sensible margin either side, and the honest advice is to sit slightly on the generous side of what the household needs today rather than exactly on it, because households grow more often than they shrink and a system usually outlasts one change.
What is not sensible is jumping two sizes because bigger sounds safer. That is how a tank ends up in a spot where it no longer fits, or a heat pump ends up too close to a bedroom wall.