[1.02] Bug : can't cast spells on city

managed to overcome this by casting on a building instead, it took a while though

Ok. As far I can remember I've seen that "bug" too.I saw it when trying to settle in a forest tile with essence.

There was a condition implicated? Like capturing an outpost at the same turn, or fighting in an ogre camp?

I only remember those two. But once settled, I tried to cast and it did not allow, saying forest tile but without realizing the new city. So strange. But same than you, with the city expansion I eventually could cast, but not in that tile.

Now you reminded me that...maybe anyone more noticed it?

I have seen this too but thought it was just mouseover offset weirdness like when your unit moves adjacent to the tile you thought you were aiming for.  I was able to just randomly move the mouse over the city tiles until it showed a city label. 

I found this happens a lot. Usually when the city has just been bult. As you yourself found out, you can cast on a building to target the city. It mostly has something to do with the way the interface updates - meaning you generally have to click a new turn to fix it.

Oh, like the lair loot thing!