Sort by custom field is not working

Piter is right, don’t use query_posts.

You could do something like:

$paged = ( get_query_var('paged') ) ? get_query_var('paged') : 1;
$args = array(
    'post_type' => 'properties',
    'meta_key' => 'pd_city',
    'orderby' => 'meta_value',
    'order' => 'ASC',
    'posts_per_page' => 5,
    'paged' => $paged
);

$query = new WP_Query( $args );

Just make sure you have the values right for your post_type and meta_key params. I.e, I use an underscore for all my meta keys: _properties.

I have a nearly identical query running on a client’s project here: http://centerpoint.com/properties/?pgd=1&v=list&filter=1&list_type=all&sortby=city