Some questions you need to consider:
What can your magic do for the ship and its builders?
Does your magic make the ship stronger or more resistant to storm damage or easier to build?
How big are the trees on your islands? How strong is the lumber? How plentiful / fast growing are these trees?
Bigger ships mean more lumber which means more/bigger forests. And that lumber must be stronger, unless magic is reinforcing the design (see 1st question). A 2 square kilometer ship would require tens of thousands of planks, which would be thousands of trees. How much forest do your builders have access to?
Some assembly required
The larger the ship, the larger the shipyards. Sure, the ship floats. But it can't float while it's being constructed (again unless magic somehow suspends the structure during construction). From the first beam until the hull, at least, is complete, the structure needs to be dry-docked.
The bigger the ship, the more people it will require for construction. Sure, your wizards can help, but unless magic is extremely powerful, it's not going to build the ship. At best, it's probably going to do things like lift heavy objects into place or provide mortars or act as power tools, not wish-level full assembly. So how many people will it require to build this ship?
How many people run the ship? You'll need full-time repair crews to manage anything that breaks, plus anyone who manages navigation, steering, and so on?
How is your ship held together? How do you prevent the ship from breaking under it's own weight? More magic?
How does your ship move? Sails? How large a sail (and how strong a mast) would it take to move a multi-kilometer-sized ship? Would it just drift with the currents, then? How do you steer it? How do you not run into things and get stuck (coral reefs, islands, icebergs, wales....)
Where in the evolution of your society did everyone stop moving and devote all their resources to building this thing? How did they come up with the design plan that would conquer the various engineering challenges it faces, and then divide their labor between resource gathering, the many construction specialties, and the support roles like medical, food, and so forth? And who trained the engineers and construction specializations for this monumental task?
Maintenance and Defense
How do you get to parts of the massive vessel that need repairs while it's under way? How do you replace broken timbers -- or even become aware of them -- when it's so large? If a fire broke out, how would it be contained? How does the ship defend itself from outsiders (pirates, invaders, etc.)?
A possible alternative:
Rather than hand-wave all of the above problems with "Magic! [insert glitter here]" have you thought about using a flotilla instead?
If, rather than one giant ship, you have hundreds of smaller ships, all lashed together, then you solve most of the problems I raise above.
- The entire flotilla could have grown organically over time as new ships were built or acquired, and then added to the flotilla. No need for a genius master plan up front!
- The resources to build the flotilla wouldn't have to be gathered all at once, but could be gathered over years or even generations.
- If a storm is on the horizon, the flotilla can separate into mini-flotillas or into individual ships, making survival of the whole far easier and safer -- the loss of any ship won't risk the entire structure.
- It's far easier to navigate a smaller ship than a larger one. If the flotilla needs to steer around an island, a shallow sea, or whatever, then they simply break apart, each sails under its own power, then reform once past the blockage.
- It's much easier to build a small boat that floats than to build a massive floating city or mini-continent. Fewer resources, easier engineering, safer for workers. Faster, too.
- Defense from attack or fire is easier: unlash the ships and spread out. If the pirates attack a ship, then other ships break free of the flotilla and surround the pirates. Suddenly the pirate ship becomes part of the flotilla and the pirates... well.. that's their problem.
- Fire? immediately unlash from the burning ship and spread out until the flames are under control or the burning ship sinks. Safety first!
- Magic isn't as necessary to make it work. But it still helps! Your mages can be useful for gathering sufficient food, for reinforcing the links, for gathering materials, for navigation, etc. etc.
- Each ship is a family home. Each has it's own character -- custom paint jobs, decorations, designs... Each ship tells a story, just like homes do. Entire regions of your flotilla may have similar designs as they were formed at roughly the same time, but travel a few dozen ships away and the designs might be completely unique. Personally, I think that makes a more interesting storytelling framework than 1 giant ship. Picturing this big conglomerate of mismatched ships, all tied together into one giant community? I can see that in my mind, the whole undulating with the waves. But 1 super-ship? That's much harder to picture as a thing that could exist. (Pure opinion, here)
- Not as susceptible to storm damage. One big thing can break under the strain of rough seas like during a hurricane. But a a flotilla of smaller ships can ride out storms, for the most part. Sure, a bad hurricane might cause some losses, but not catastrophic losses to the entire flotilla.
- History. In general, human-occupied locations grow over time. There's history as people expand a city and as technology changes. Very rarely does an entire kilometer-wide area just spring forth, fully planned in advance. The flotilla concept easily accommodates the way historical cities grew from small towns into the chaotic maze of streets and buildings and parks that the residents know and love.
- Food gathering is more readily handled, since the outermost layer of ships can all be fishing vessels that break away during the day to set out nets, then come back. The flotilla becomes their harbor, so to speak, rather than trying to feed the entire civilization from the deck of a single ship.
- Harbors can be used without special treatment. A massive ship simply can never approach land. But smaller ships can break free of the flotilla, come to harbors/ports to trade or collect supplies and then return without any special effort. The flotilla stays at sea, but traders can move freely between flotilla and shore as needed.