But speaking on Sky Sports, Powell, 47, who started his playing career at Selhurst Park in 1987, warned that reaching the higher echelons of the Premier League would prove difficult.
"They have an issue with the stadium.
"It's a long-term issue. They have stayed up quite comfortably in the end over the years under Alan Pardew, Tony Pulis, and Sam Allardyce last season. But I think Steve's [Parish's] model is to have that balance with the financial aspect. I'm sure that's been challenged by Wilfried Zaha's new deal.
As for pushing on as a club, Powell warned: "We've seen other teams trying to get to the next level. And the next level is so tough. When you look at Everton trying to break into what is now a top seven. So really what are their [Palace's] aspirations? Top half? Yes, but I can't see it being any more than that. They are like a Southampton or a Watford. They struggled last year. Or a Stoke.
"So I just feel Crystal Palace need to have a season where they just edge up a bit more, maybe in the top half, and then go from there."