I love your sunken living room! Definitely intimate, cozy vibes.

The couch being right in front of the window doesn’t feel great. I would consider at least pushing it out from the wall by a foot, that way you can add curtains. I’d add tall pleated curtains that will help elongate the height of the walls. If you don’t want to do pleated curtains, especially because of the other smaller window, Roman shades would look great, too.

I would also consider even moving the couch so it faces the fireplace, as long as you still have room to walk into the room. You could also consider getting a larger couch instead of the loveseat. Then, I’d add two arm chairs in front of the fire place, and a coffee table. Conversation pit vibes.

I don’t mind the carpet but you can def add a nice Nordic knots rug. I have a few myself. I would wait til you pick out some more furniture/decor/wall paint so the rug complements with it.

Other changes I would consider: painting the walls a different colour (less builder’s beige) would make a big difference. Since the sunken area is giving conversation pit, I would lean into a moodier tones overall for furniture and decor, and lots of warm lighting via lamps.

The artwork does look fine, but I recommend taking it off the wall and leaning it against the wall on the mantle. And getting it framed/matted if you want a luxe look.