Flight instructor reported that during a training flight; they had a near midair collision with another aircraft performing maneuvers in overlapping airspace.

Narrative

Daytime VFR training flight in Aircraft X. I was working on altitude hold; crabbing for wind; and ground reference maneuvers in turbulent conditions.. Flight was conducted between 8000'-9000' MSL. At the time surrounding this incident; we were eastbound; approximately 8000 MSL (1000 AGL). I visually saw another aircraft (later determined to be Aircraft Y via ADSB data); approximately 2 miles SE of us; on a westerly course; and +1000' above. I do not recall hearing any position call-outs on the local practice frequency. Since Aircraft Y was well away from us on a divergent heading; we began a ground reference maneuver (turns around a point) at 8000 MSL / 1000 AGL. At this point my attention was directed to my students altitude and turns in a low-level maneuver. We did two turns around the selected point; and rolled out; and began a climb to a safer altitude.Unnoticed by me during the maneuver; Aircraft Y had reversed course; flown eastbound; then reversed again westbound; and had began a descent. (learned from ADS-B data). Moments after our rollout; I made visual contact with Aircraft Y; in a near-intercepting course. My post-maneuver climb; and their descent put us within an estimated 300'-500' vertical separation; and estimated 300'-500' laterally. I quickly stopped our climb; and determined that Aircraft Y would pass high and to our right; and we would pass behind them. No evasive actions were taken; but separation was reduced. After the incident; our aircraft continued in opposite directions to a much safer distance.This situation seems to have happened because of two aircraft; each practicing their own maneuvers; in overlapping airspace. I incorrectly assumed Aircraft Y was on a straight & level course when I first saw them; and did not anticipate that they would be practicing maneuvers of their own; which had the result of them NOT continuing on the non-conflicting course I observed. Also; Aircraft Y; being a much higher performance aircraft; was able to cover much more distance than anticipated.To keep this from happening again in the future; I will try to watch other aircraft in the practice areas closer; and attempt to determine their intentions with a greater degree of certainty. And if determined that they are maneuvering in a random manner; to give them much more separation considerations before beginning maneuvers of my own.