I've done both. When the kids were small, it was really just friends' kids, so we had parties in the house, with treasure hunts, pass the parcel etc
When dd1 went to school, it became apparent that the whole class were invited to parties- 25 kids, plus my other 2, so had to be a soft play/ hall. I decided that all my dc would have a "whole class" party in P1, and thereafter, once they had established groups of friends, it would be smaller parties for them. In P2 dd1 had an arty party, and invited the 6 girls she was friendly with. I imagine that trying to do anything like that, in the house, with 25 kids, some of whom are not really into making clay models etc would have been a disaster!
dd2 is having her "whole class" party on Saturday
. I am in the throes of starting a new business and just don't have time to do all the food etc, so I threw money (although it hurts!) at it, to assuage my bad-mum guilt. 30 children are coming, dd2 chose the venue, and they do all the food/ party bags etc. Still have to decorate the cake though..