One thing to remember is that these are being sold in the UK for around 100K pounds. Sure, that is $200K US, but you have to remember that our economies are different... What someone is paid in the UK isn't necessarily half of what an equivalent professional would make in the US. So that 100K pounds becomes a lot more affordable than $200K in the US.
Those "homes" appear to really be studio-style condos. Virtually no exterior maintenence. Interior has a very basic kitchen (fridge, microwave, and two burner hot plate stove), small living area, small bedroom, and small bathroom with room for an efficiency washer and dryer. It isn't designed as a home for a couple with kids, or even for a couple. It is a single person home (instead of an apartment). They are probably tapping into a market for young professionals (recent university grads) who live in or near an urban environment and want to own a home, but don't want all the responsibilities of keeping up with the home. It wouldn't be much to clean after all.
That being said, I would go completely stir-crazy in a place that size, but that is mainly because I have a bunch of furnature and other shit that I have collected over the years (I'm 28 and single). If I had never had my own apartment in college and had graduated college into having a good job where I traveled a lot, this would be the perfect sort of space for me. I would a miniscule amount of worldly goods, and it would force me to streamline my life.
I'm going to be looking into buying a home in 2008 or early 2009, and I am thinking 2 bedroom, 2 bath, big kitchen, etc, but the truth is that I don't need all that space and in the end I'll just have to keep up with it if I have it... oh well.
R