Just switching the default install location does not free up storage. If you follow up to the insufficient-memory tag-wiki, you will find the explanation:
First thing you should check when encountering this problem is how much internal storage is left on your device (space on sdcards, internal or external, is completely irrelevant to this problem). As a general thumb rule, you need at least 25 MB free
So regardless where apps are to be installed: Google Play first needs to download them, and stores them in
/data/local before installing them. This is in internal storage, hence it will check there for "sufficient space".
For things to do, again the insufficient-memory tag-wiki is a good starting point, and should be sufficient to solve your issue (basically, you need to free up some space, e.g. by moving some apps to SD or deleting some you no longer need). If that still didn't solve the issue, please indicate (and update your question to note what you tried, what the outcome was, and where you're stuck).