The best spot on earth in general terms is Makkah, then Madinah, but the best place to live on earth for each person is the spot where he is most able to obey Allah and His Messenger

Firstly: 

The fuqaha’ are unanimously
agreed that Makkah and Madinah are the best sports on earth, then they
differed as to which of them is best. The majority of fuqaha’, including the
Hanafis, Shaafa‘is and Hanbalis – and it is also an opinion held by some
Maalikis – are of the view that Makkah al-Mukarramah is superior to al-Madinah
al-Munawwarah, for a number of reasons which were listed by the scholars: 

1.    
The fact that it is obligatory to go there for Hajj and
‘umrah, which are two obligatory duties for which there is no equivalent
that happens in Madinah. 

2.    
Although Madinah was distinguished by the fact that the
Messenger of Allah (blessings and peace of Allah be upon him) settled there
after Prophethood, Makkah is superior to it, because the Prophet (blessings
and peace of Allah be upon him) stayed there for thirteen years after his
Prophethood began, and he stayed in Madinah for (only) ten years. 

3.    
Although Madinah is distinguished by the large number of
visitors from among the righteous slaves of Allah, Makkah is superior to it
because of the large numbers from among the Prophets, Messengers and the
righteous who visited it. 

4.    
Kissing and touching are acts that are uniquely connected to
the two Yemeni corners [of the Ka‘bah, i.e., the corner where the Black
Stone is and the Yemeni Corner], and there is nothing comparable in Madinah. 

5.    
Allah, may He be glorified and exalted, has instructed us to
face towards Makkah in prayer wherever we may be, in any city or in the
wilderness, but no such requirement is made of us with regard to Madinah. 

6.    
Allah made Makkah a sanctuary on the day He created the
heavens and the earth, and it was not permissible for any of the Messengers
and Prophets [to fight therein] except our Prophet (blessings and peace of
Allah be upon him), out of all the other Prophets, and it was only made
permissible for him for a short time of one day. 

7.    
Allah, may He be glorified and exalted, praised the House (the
Ka‘bah) in His Book in a manner in which He did not praise Madinah, as He
said (interpretation of the meaning): “Verily, the first House (of
worship) appointed for mankind was that at Bakkah (Makkah), full of
blessing, and a guidance for Al-Alameen (mankind and jinns)” [Aal ‘Imraan
3:96]. 

8.    
One prayer in al-Masjid al-Haraam in Makkah is equivalent to
one hundred thousand prayers offered elsewhere, and nothing similar is true
in the case of the Mosque of the Prophet (blessings and peace of Allah be
upon him) in Madinah or any other mosque. 

And there are other virtues by
which Makkah is superior to Madinah. 

The well-known view among the
Maalikis is that Madinah is superior to Makkah. Al-Hattaab said: This –
i.e., the view that Madinah is superior to Makkah – is the view of the
majority of the people of Madinah. 

They are also unanimously agreed
that the Ka‘bah is superior to Madinah, apart from the noble grave,
blessings and peace be upon its occupant. 

See: al-Mawsoo‘ah al-Fiqhiyyah
(32/154-156) 

Undoubtedly the Ka‘bah is
superior to the grave of the Prophet (blessings and peace of Allah be upon
him) itself. Shaykh al-Islam Ibn Taymiyah (may Allah have mercy on him) was
asked about two men who disputed: one of them said that the ground where
Muhammad the Prophet (blessings and peace of Allah be upon him) is buried
was superior to the heavens and the earth, and the other said that the
Ka‘bah was superior; which one was correct? 

He replied: 

As for Muhammad himself
(blessings and peace of Allah be upon him), Allah has not created anything
or anyone that is dearer to Him than him. 

As for the grave itself and the
ground where he is buried, it is not superior to the Ka‘bah, the Sacred
House; rather the Ka‘bah is superior to it. It is not known that any of the
scholars regarded the ground of the grave as superior to the Ka‘bah, apart
from al-Qaadi ‘Iyaad; no one suggested that before him and no one agreed
with him on that. And Allah knows best.

End quote from Majmoo‘ al-Fataawa
(27/38) 

The more correct of the two
opinions on this matter is that of the majority of scholars, which is that
Makkah is superior to Madinah in general terms. As-Suyooti (may Allah have
mercy on him) wrote an essay dealing with this topic, which has been printed
under the title: al-Hujaj al-Mubeenah fi Tafdeel Makkah ‘ala al-Madinah
(Clear Proof of the Superiority of Makkah over Madinah). 

Shaykh Ibn Baaz (may Allah have
mercy on him) was asked: 

Which is better, to stay in
Makkah or in Madinah for the purpose of worship? 

He replied: 

Makkah is best, followed by
Madinah. Staying in Makkah is best, followed by Madinah, as it says in the
hadeeths; one prayer in Makkah is equivalent to one hundred thousand prayers
(offered elsewhere). The Prophet (blessings and peace of Allah be upon him)
said concerning Madinah: “One prayer in this mosque of mine is better than a
thousand prayers offered elsewhere, except in al-Masjid al-Haraam. One
prayer in al-Masjid al-Haraam is equivalent to one hundred thousand prayers
(offered elsewhere).” This is a great difference. Good deeds in Makkah are
many times greater (in reward) than in Madinah.

End quote from the Shaykh’s
website:

http://www.binbaz.org.sa/mat/21134

With regard to anyone saying
that the Prophet (blessings and peace of Allah be upon him) loved Madinah
more than Makkah, if what he means is loving to settle there, then yes;
staying there better served the important purpose of spreading the religion
and establishing the foundations of the Islamic state, and because it is the
place to which he migrated, and because Makkah at that time was the
headquarters of disbelief and its people. 

But that on its own does not
indicate that Madinah in and of itself is superior to Makkah in all
aspects. 

Al-Bukhaari (3926) and Muslim
(1376) narrated from ‘Aa’ishah (may Allah be pleased with her) that the
Prophet (blessings and peace of Allah be upon him) said: “O Allah, make
Madinah dear to us as you made Makkah dear, and more so. Make it healthy and
bless us in its saa’s and muds [units of measurement]. 

Al-Baaji (may Allah have mercy
on him) said:

This is a supplication from the
Prophet (blessings and peace of Allah be upon him) asking Allah to take away
what they felt in their hearts of homesickness for having left Makkah and
settled in Madinah, and asking Allah to make Madinah as beloved to them as
Makkah was, so that they would dislike to move from it as they had disliked
to move from Makkah.

End quote from al-Muntaqa
(7/194) 

This supplication of the Prophet
(blessings and peace of Allah be upon him) was only because of what his
companions were suffering from of the fever of Madinah, so he prayed that
they would love to stay there and hate to move from it.

For more information, please see
the answers to questions no. 36863 and
106609 

And Allah knows best.