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I would go along with most people and say London.

Considered by most to be the capital of the world, one of the biggest and most populated places on earth. It has pretty much all the history needed for Rockstar to use. It is a violent urban place with many mixed cultures.
In terms of gangs many of the ones Rockstar have used in games have orginated from there.
Lots of new iconic places to rip off.
If anyone remembers the game The Getaway, that was set in London, that game was imense. So it can be good if done well. I think having the right mixture of people and areas would make the game good. You have some of the poorest places in the world in london and then some of the most expensive places on the planet. It is such a divide that they could return to that rags to riches story, which i prefered to that of GTA4.

But for GTA5 i think they need to take it further then just one city. They could have a mixture of cities. The world is a small place now and getting to places is just a flight away.
I would love it if they did London,Sicilly,Johanesbourg,Sydney,Rio,Mexico City,Las Vegas
Then obviously you can get to different cities via flying. It would have such huge potential and covers pretty much the criminal hubs of the world.