Tel Aviv's thriving tech scene and young, educated population have helped the city prosper over the years. Most of the population is fluent in English, making it an easy place to do business.

The city is considered a cultural hub with plenty of museums, a hopping night life and a beautiful Mediterranean coast.

But that's pushed up real estate prices across the city. Tel Aviv is the most expensive city on this list.

The cost for a two-bedroom apartment ranges from $500,000 to $1.45 million, depending on location.

"Tel Aviv displays a large number of the characteristics we have identified as boding well for residential property markets," said Barnes. "Even its UNESCO world heritage site status mark it out as a typical 'rising second-tier' world city."