It's not the balloons, it's the water. Mythbusters tested penetration of everything up to a .50 Barret into a swimming pool. Nothing went more than about a meter. And the faster the round, the less it penetrates owing to water surface tension.
It is not just the density. As the bullet moves thru the water, it must displace the water in front of it and the energy is dissipated by the water all around it.
That said, penetrating 4 water balloons (they look to be about 8 inches in diameter) is not a small thing. That is 24 inches of penetration in a dense liquid. The round would undoubtedly killed two people (barring any major bones), so that is pretty impressive.