It is left to the DM to resize after being informed by libvirt there has been a change. Many don’t.
Poor design decision IMHO.

xrandr --output Virtual-1 --auto

Will resize to the window size you have chosen. The Virtual-1 part might need adjusting. You can find out by using

xrandr

on it’s own. In the case of a Manjero VM I just installed

$ xrandr
Screen 0: minimum 320 x 200, current 1256 x 869, maximum 8192 x 8192
Virtual-1 connected primary 1256x869+0+0 (normal left inverted right x axis y axis) 0mm x 0mm
   1256x869      59.98*+
   2560x1600     59.99    59.97  ....................................

So it’s Virtual-1.

Make a script and link it to a hotkey and it’s less of an annoyance.

Note: spice-vdagent may need to be installed and running for this to work ?