The last book of the Bible says that at the end of time, the new Jerusalem (also called the Holy City) will come down from heaven and be the place where Christ and His people live:
‘Then I saw a new heaven and a new earth, for the first heaven and the first earth had passed away, and the sea was no more. And I saw the holy city, new Jerusalem, coming down out of heaven from God, prepared as a bride adorned for her husband. And I heard a loud voice from the throne saying, “Behold, the dwelling place of God is with man. He will dwell with them, and they will be His people, and God Himself will be with them as their God. He will wipe away every tear from their eyes, and death shall be no more, neither shall there be mourning, nor crying, nor pain anymore, for the former things have passed away.“‘ (Revelation 21:1-4)
It is hard to know how literally we are to understand the new Jerusalem, but the Bible does talk about a new heaven (meaning sky) and earth. So it would seem that the new Jerusalem will be physical but also spiritual. There is an elaborate description of it in Revelation 21 and 22, but some of the description may be word pictures that hint at realities that are too difficult for us to understand now. The important thing, however, is that after the final judgment, Christ and His people will live together in perfect joy and peace, in resurrection bodies. The place where they live is symbolically called the new Jerusalem because the name Jerusalem has been identified with the place of God’s presence since Old Testament times.