New Zealanders’ overwhelming favour of residential property investment has resulted in residential properties being overvalued with a house-price-to-income multiple equals to 5.9 for the country and 10 for its largest city – Auckland. With the deterioration in housing affordability; currently ranked the fourth worst in the world for Auckland (the largest city in New Zealand), investing directly in residential property become riskier. Under this scenario, a more passive property investment option such as REIT could be more viable. The objective of the paper is to assess whether REIT could offer a better risk and return contour then direct residential property option to potential property investors in New Zealand. Empirical findings from this study show that there is a significant difference between the rates of return of these two types of property investment options. Further analysis using Treynor ratio indicates that investing in REITs generated a higher return on a risk-adjusted basis. This finding has implications for investors looking for a more affordable and liquid way to tap into the property asset class.