The problem is that SVG doesn't AFAIK support layout constraints - you'd have to essentially recreate flexbox and grid in JS, and God forbid you wanted to make the design responsive!
I agree with you in principle that SVG is a better match to app UIs, but we'd need a good layout story for that to happen. And I'm using SVG for much of my own application interface!
ideally, an SVG layout optimised for web app design would be somewhat more flexible than just grid and flex - such as anchoring an element to 2 other separate parents (or in other words, supporting a directed graph rather than a tree). A pure constraint system would be nice, but is probably not viable if fast rendering is important (which, it is).
I agree with you in principle that SVG is a better match to app UIs, but we'd need a good layout story for that to happen. And I'm using SVG for much of my own application interface!