The first option seems to work better when you add furniture in? Given they'll be starting secondary school soon'ish I don't know whether a wardrobe and chest of drawers is a better option for their uniform? You can also use the bottom of the wardrobe for shoes, sports equipment etc and I'd pick a colour that blends into the wall. I personally wouldn't do 2 feature walls however use colour blocking to zone each of their spaces. Try and find a blue and yellow that work together and add a couple more complementary shades. I've added a couple of pics but there are loads online. You could do a geometric shape or border etc. Having their duvet in their colours may be an idea too. I would probably go for beanbags for seating which can go at the side of the bed when not in use. Is their room under the bed for baskets for toys? Maybe also shelves over the bedside table?

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 :-).

You could add another small window for the new room. A good builder can easily do that for you, but as it’s the front of the house you need to check with the planning Dept just in case. I had a downstairs back door removed, filled in at the bottom and a new bigger window fitted in my kitchen. Yes you will need lighting, sockets and some form of heating and obviously a new entry door to the room.

Thank Isla and Siobhan for your valuable insights, I am going to scrap the wardrobe, sorry I forgot to mention in the first post. We will be building/ buying new wardrobe in few months time, first we need to make sure that we have a good design in place before we think of wardrobe / storage options. office desk , bed and bed side tables will be the same, as we don’t want to change them we kind love them . It’s just that the bed is super king which consumes a lot of space in the room. Is it wrong to put the bed in the same side of the door wall as it is now . I am thinking of two options one - just infront of the big window which will cover most of the window, another one - put my bed where my desk is right now and move the desk to the windows‘ side. @Isla the TV bracket is not swivel unfortunately