Pretty sure the anime cut a couple lines from the MC's interaction with the dragon, and although it doesn't exactly say why, it hints at it a bit:

This is from chapter 5. So it seems that the fairy king likes the MC because the MC uses water magic, not much else to it, confirmed at least.

But my guess is that the fairy king sees his water magic as already capable enough, and thought it was a waste for him to not be good with a sword too since one skill can complement the other.

And also a minor spoiler from stuff that will happen a few episodes from now, which might also hint at another reason:
There will be an enemy that recognizes the clothing is from the fairy king while fighting the MC, so perhaps he has reasons to want another strong fighter on the good side.

I'm sure the manga also cuts stuff tho, so perhaps the LN has more details on that part.