I think if you were to do instanced housing I would not put it in the wards. I would do it the way LOTRO originally did; it would take the form of a zone transition in each capital city. (the dotted lines you cross) essentially walking you into your home area within the city itself. This would keep wards as a unique concept while still giving the instance folks what they want and ideally increase player traffic within the respective cities. I would NOT give you a direct teleport to your instanced home as that would undermine the secondary function I feel and raise the ease of instanced housing further over the ward system that would already begin to wither as people will simply go the easiest route to getting a home (See the housing on the Materia DC).

I do feel that people are seeing more life in the wards at the moment due to demo bringing current players there and getting rid of abandoned homes. I feel that the Wards should serve a function of being a player populated RP hub; thus the wards should remain. For folks that just want their own private house to dwell in I think you essentially have it that you walk down the street in Gridania or whatever and arrive in a instance that reflects the size and position of your home. So you might choose "Beachside bungalow" or "Cape over the sea" or "located on the thoroughfare" for a mist house instance; plop down your size and call it a day.

I would also tax instanced housing probably to ensure its seeing use; or implement auto-demo for instanced housing similar to what you see in the wards.