The Premier League champions twice came from behind to draw 2-2 at Liverpool on Sunday.
City are currently without injured striker Sergio Aguero, but Royle insists that it is the club's strength in depth that makes them league's team to beat.
"I think that at the moment City are comfortably, in my own opinion, the best team in the division," Royle told talkSPORT. "I thought they were going to win the Premier League by a mile until they had a mini wobble and then Manchester United made a big comeback.
"I look at this Man City team/squad and I think they are definitely the best.
"You can't take liberties with them with the pace that they have. There won't be Aguero there, which certainly takes a lot of the forward pace out of them but there are still have so many , what I call, magicians who are capable of either creating or scoring a goal."
Next up for City is the home visit of Queens Park Rangers to the Etihad.