The "axiom of induction" regarding numbers says that :
for every property P of numbers, if P holds for 0 and for every number n, if P holds for n, then P holds also for n+1 (the "number after n"), then P will hold for every number.
This axiom of induction exploit the "structure" of the set of natural numbers : there is a first one, and they have an "order" which, for every numbers gives us the "next one".
Per se, induction does not implies the infinity of numbers.
The infinity of them is licensed by other axiom; in detail, by the axiom which states that there is a number (usually 0) which is not the "next one" of any number and by the axiom which states that there are no two different numbers which has the same "next one".
In your case, the "collection" of all cities does not have the structure of natural numbers (a first one, and an "order" that for every numbers gives us the "next one"); thus, we have no reason to assume that there exist an infinite number of cities.