I think if the location works for you and you can afford to extend, and can’t find a better alternative then it make sense to extend. Especially if you’re going to stay for a while! We are nearing the end of quite a big extension/refurb and it has cost a lot, but is cheaper than moving would have been, and we are aiming to stay here for the foreseeable future, so it felt worthwhile spending the money. If you’re extending, moving walls, new bathrooms and kitchens, it will rapidly add up, as you’ll also need new Flooring, extra windows etc Is there enough head height in the loft to do a partial loft conversion perhaps?

Same theme. different styles.

So a dormer loft conversion costs the same as a side extension? It sounds like you'll be getting more space for the side extension for the same amount of money then. Have you had a look at other bungalows down your road or area that have had extensions vs no extensions and see what they have sold for, then you can see if it's worth it but who knows what the market will be like in a couple of years time. In terms of appealing to more when selling, people probably would prefer bedrooms upstairs but if bedrooms are larger and downstairs is huge it will be more attractive to buyers ( I think ) especially if there is a large family. Lots of new builds have a bedroom downstairs so it's not unusual plus families considering a bungalow won't be looking for the norm in terms of layout so 2 bedrooms downstairs is fine. You can also ask your estate agent that sold you the bungalow, get their thoughts on what is attractive to buyers, I'm sure they'll be helpful in case you'll use them in the future :-).

If you could remove some or all of the cupboards in and around the kichen and enlarge this room this could make a sunny second bedroom, then combine bed 2 and 3 as a sitting/diningkitchen and have an inline kitchen on the right wall