I think it's a tough one.
Obviously being rude is not good. But acting like something is lovely then getting rid at first opportunity could also be deemed rude. What happens when the guests visit and the thing they bought isn't there?
We (DH & I) live in a small 2 bed flat with one DC and one on the way, there's hardly space for things we need, there's no space for things we'd love to have, let alone things that other people buy us.
Everyone knows our living situation.
Yet people buy us things like garden toys - we don't have a garden? Not even a communal one. Sand and water table, swingball but the football version. It's difficult to be thankful and appreciative of something that is so ill thought out.
A family member told us they've ordered Ds a bookcase.. Where am I gonna put it? So at that point I did say ooh actually we don't really have space and they cancelled the order. That was probably deemed rude but where do I put a bookcase that we don't want or need (Ds has a kallax and uses some of those pockets for books) in a tiny flat?
On DS's first birthday we were presented with a giant teddy bear, about 8ft tall & 3ft wide, again by people who know we have no space.
We don't have a loft or garage or anywhere to store things.
It's such a waste of their money. Especially when Ds would be so much happier and actually get use from a cheap £1 book, car from pound shop, and that wouldn't fill up our flat.
When space is at a premium I get frustrated that other people are choosing the stuff to fill up our flat. Yet we can't have things we'd really like to have.
And when you have so little space the stuff you do have you want to love, not have to have because someone else bought it.
So I can see where you're coming from op. I'm not really sure of the answer. I don't want to be rude but I also don't want the stuff and want family members to save their money instead of buying massive stuff that I then need to get rid of..... but only when enough time has passed that I can get away with saying he's grown out of it, it broke, he doesn't play with it etc.