Plans to build new homes in an area of Crystal Palace Park have been dropped, but campaigners still face a fight to stop further developments.

The London Development Agency (LDA) which is planning a £100million redevelopment of the historic park made the decision to ditch plans to build homes at the Norwood Triangle area of the park following public opposition.

But new homes could still be built at the Sydenham and Rockhills entrances to the park.

Valerie Shawcross, London Assembly member for Lambeth and Southwark, said: "I think it was inevitable. The public consultation was a very honest one a real attempt to ask people what their aspirations for the park were.

"The message did come back that although there is a lot of satisfaction, people did not welcome a development on that site. We accept that and we knew that would be controversial."

John Payne of Crystal Palace Community Association, which was opposed to the housing plan, said: "It is encouraging that common sense has prevailed in that particular part of the park. We were resolutely opposed to that."

However, Ms Shawcross pointed out that there is a "downside" to the plans being dropped.

"We did hope to try and help the shops and businesses around the area and we did want to put an underground car park in but if we don't do a small amount of development work, we can't put a car park in."

Alternative options for the Norwood Triangle corner are now being considered by the LDA and include a new space that could accommodate events and activities such as the ice rink that was constructed in the park over the Christmas period.

"We've had great feedback about the ice rink," Ms Shawcross added, "There will be an improvement planned for that corner."

However, housing will be a component in other areas of the park. A development at the Rockhills Gate entrance, which is currently inaccessible to the public, could be built.

"At the moment it is a dead corner. Some housing there would pay to create a new entrance way with gardens, a glass house and public facilities that trade off is a better one," said Ms Shawcross.

A group of traders described the news as a "huge blow" to their town centre.

Andy Stem, of Triangle Traders Traders Association, said: "It is a huge blow. A new car park would have been a massive boost to the centre and our group thought it would be awful to build a vibrant park and new sports centre next to a declining town centre.

"This is a once in a lifetime opportunity to make Crystal Palace vibrant again and it would be ridiculous to have all this regeneration and allow the town centre to deteriorate."

But Mr Payne said: "One house on metropolitan open land is too many."