My friend in the UK has a tankless heater for her flat and it works extremely well. I've also stayed in flats in France that have them and never had cold water.
The benefit is that you don't have to use energy to keep water hot that you are not using. I should also say that the only tankless systems I've see use natural gas to heat the water.
I was hoping to get one in my place in Toronto but, unfortunately, our water heater died while I was away on business and wasn't there to ask about the availability of an inline system (I later found out that they were available from the gas company).
Home Depot Canada has these models:
LINK