Wow, 1100 ft2 for four beds? How big are the rooms? Sounds pretty small to me, especially if that's with a loft conversion done already. I think if you have just a barely-walking toddler at the moment, then you're going to find an increase of 100ft2 not enough (over three floors - so the square footage may well be including stairs/landings which you don't have in your flat, the different EAs seem to work it out differently - but even if not, vertical space isn't quite as useful as lateral, no good having a toddler's playroom on the top floor and you can't knock through ceilings!).
I think you'll find that in 6 months' time, as your toddler starts acquiring big toys and taking up more space, trundling up and down with buggies/walkers etc, the smaller house will feel rather smaller than your current flat. Add another child to the mix and it will feel much smaller than your current flat. Whether or not that's too small depends on your reasons for moving - location, or space? If you're moving for more space, then house 1 won't offer that.
Re green space / outside space, does either house have a garden at all? Is house 2 anywhere near a park/woods/other public open space? Think about how much time you spend inside the house vs outside it too. Personally we've not used the garden once since the beginning of August - it pissed it down for Aug, then term started and the DC were back at school/nursery. We have been outside at weekends, but generally for a whole day outing somewhere, not just 20 mins in the park. We did used to spend a lot of time in the park (mostly me pushing the buggy to get a DC to sleep) but once mat leave finished/ the DC were at school/nursery, there just isn't time. This time of year it's practically dark when they finish school at 3.30pm, so the DC and their friends play in each others' houses.
Re friends - again depend on how far house 2 is, but I will say that as the DC get older, you will find your social lives dictated by THEIR friendships... Football/swimming take up weekend mornings, birthday parties use up afternoons... I do still see friends very frequently, but now most of my friends are other school/nursery/toddler class mums.
Assuming that location 2 isn't a complete dive, and that you want somewhere to live for a few years rather than somewhere to sell when DC2 comes along, I think house 2 offers more potential long-term.