Well, it'll really depend on your playing habits considering all first party games are being released on physical carts meaning the actual footprint will be minimal on the system(just like it was on the Switch).

However, digital bros will definitely suffer rapidly from the lack of storage for a console getting third party ports with about the same file size than the competing current platform.

In itself if you make the comparison with the OG Switch, the storage situation was worse. Even first party wise, game file sizes could take more space of the console SD memory than the newer one. Third party games would take it in one fell swoop if not two at worst.
And people tend to forget, the bigger micro SD card to add storage available was also a 256GB card in 2017.
This isn't much of a different scenario to start with.

Switch 2 is superior because it's the only platform that allows me to play games from the cartridge without any install. Micro SD express cards are also relatively affordable and will get cheaper. I paid $40 for my 256 gb via Sandisk when they were on sale earlier this year. PS is worse because installs are required no matter how you purchased (digital or physical). 

Its technically worse but the games are much smaller and so I see it almost similar - adequate amount of storage for both for me.

Regardless, I'm only planning to install a few games and play them before deleting them once I'm done.

I dont mind this, I got 5 GB fiber with no data cap so my downloads are quick and painless lol

825 is not enough on ps5. I have found 1.5tb to be around the sweet spot. Got 2tb but I don't seem to ever need that last 500gb nor is 32gb on Switch enough even as a vapid Indie user with an even cart to digital ratio. 64gb would do fine, I'd reckon though cause I def don't need the 128gb card I have. I suspect the same will be for Switch 2, just not enough but a card expansion will be too much. 

Well I dont download all the games I own.

I would need like a 5 TB drive or bigger for all the games I have on both PS4 and PS5 (Almost 700 games).

So I just download a few, play and once I finish them, I just delete them off the SSD - I do that with all my consoles and on my gaming desktop, I only have one game downloaded at a time.

People mostly buy a Nintendo platform for Nintendo games in most cases, so I'd say it's roughly equal if you consider that, or slightly better.
For third-party games, it's worse.

I've never had issues handling the space on my PS5, I've never had issues handling space on my Switch 1 with a cheap 128 gb sd card.

Considering most of the third party titles will be digital cards... I'd say worse. Far worse.

Do you not know how numbers work?

825 > 256

Hell it's worse than the 500GB PS4 from back in 2013.

Portability > Mouse + Joycon > Mouse + KB > gyro > dual analol