If you want to go for a Domination victory, your vassals' territory and population don't count as much as your own, so it might not be in your interest to create colonies. Not to mention having more direct influence on what those cities do and how the land is developed is usually much more effective than having a vassal. And on certain map types, like Archipelago or Islands, it's hard to create an empire of considerable size without State Property, mainly due to the colonial maintenance. Creating colonies left and right and only maintaining a few cities of your own not only severely weakens you, but depending on your computer's stats, the game might not even run very well anymore with several extra civs (the AIs will probably be creating colonies too). Even on a map with say two continents, where you have already conquered one of them, colonial maintenance will skyrocket once you seize more and more cities on the second. Creating a colony will set you back on the way to your goal, so State Property is usually the way to go. But if you have no intention of vassalizing / creating colonies, you might want to play without vassal states and avoid practically having to use State Property.