Rispetto alla nostra casa, la vostra è un palazzo.

English Translation

Compared to our house, yours is a mansion.

This answer seems to imply that “palazzo” is a very grand luxury building, when in fact (in addition to “palace”) it means simply any large building - often typically a standard multi-family apartment building.

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Yes, perhaps “una reggia” might have been a better choice than “un palazzo”.

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I think here palazzo is used for ironic emphasis, it sounds so much better to say palazzo than reggia. When I commented on my friends big house in Lucca compared with my modest apartment, she exclaimed, “Oh yes, I live in a real palazzo no!”

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That makes sense, but the translation is poor I think and should simply be “palace.”